The fact alone that Lucario gets more powerful as his damage goes up makes him very, very good. Not just 'cause of the power but because of;
a) some people become hesitant to attack him, and instead just rush to kill him ASAP, which leads to mistimed attacks and panic.
different knockback amounts caused by increasing damage lead to unpredictable combos.
c) his reach also increases with damage, forcing your opponent ro constantly re-evaluate their positions when attacking you.