The welfare state does not oppose socialism by existing. By and large, it is still a progressive element under capitalism, as it is a set of concessions which the post-war workers' movement fought hard to wrest from the bourgeoisie. What opposes socialism is the capitalists pointing to these concessions and threatening "You lose this if you revolt". Therefore, the decline of the welfare state does not need to correspond to a rise in socialism when the threats don't decrease in volume. Notice how this can be done even if there is no welfare state at all, by threatening that people would lose even what little they have outside of the welfare state if they rise up.
Therefore, the central reason of why communism is outside the political mainstream is equal in both the US and Europe: It is that the mainstream of opinion is controlled by a few media conglomerates who would rather not tell you anything about socialism except the typical campfire horror stories about billions dying and there being nothing to eat. Outside of academia, the West cannot have any serious, broad discussion of the modern developments in planned economics, the phenomenology of the various leftist factions, the merits and demerits of concrete actions of socialist countries, or the future of humanity after capitalism, because someone would have to pay for people witnessing and partaking in such a discussion, and you'd be hard-pressed to find a capitalist to chip in.