Right now it is behind a bunch of paperwork, but with blockchain it would be easier to see what they are spending money on.
It is not difficult to obfuscate your bitcoin and transaction from all but the most determined of attackers. If the US government were to start using bitcoin, they would have no problem doing so. Take a look at Coinbase, for example. They used to have all the cold storage on a small handful of address, but they have now split their cold storage across thousands of addresses, so much so that no one except Coinbase themselves really know how much they are holding in their reserves. The US government would absolutely do the same kind of thing.
Plus, we get to see their wallets as well and how rich they are getting from stuff, if they hide it then it is illegal
They get to make the rules. If they want to be able to hide bitcoin without it being illegal, then they would simply make it not illegal for the government to hide bitcoin, while still making it illegal for everyone else to hide bitcoin.
we put them in jail or take all their money
And how exactly do you propose seizing someone's bitcoin if it is held in their own wallet?