The limiting factor is usually, someone has to pay for the spying and the punishment. A lot (most?) of troublemakers just aren’t worth the trouble of spying or punishing.
Could implement punishment for that specific crime, at huge cost, but you can't expand that to all crimes. Well, I suppose you could try feudalism mark 2 where most of the population is determined to be criminal and therefore spends their life "having to work of their debt to society", but then you have to find out the hard way why we stopped doing feudalism mark 1.
We are already in the jail.
Certainly don't get many travel opportunities.
You say something wrong about a party, suddenly you can't board a plane, take a mortgage, enter some buildings, ...
Your credit score would look at how compliant you are with policies that can get increasingly nonsensical.
What’s one more form of BS hallucination foisted upon the meat based cassettes we exist as?
The government is a lot of things, and none of them are subtle.
Source: The ironically named PATRIOT ACT and similar.
Spying isn't just for troublemakers either. It's probably worth the trouble to the vindictive ex-husband willing to install a hidden microphone in his ex-wife's house and in order to have access to a written summary of any conversations related to him.