I've recently been thinking about whether the US can move to a EU like model with each state having control over it's own policies but sharing a single market and monetary union. In addition, competition is well regulated and a shared budget exists. In addition, it looks as if this shared budget is a little over 1% of the Gross National Income of the individual countries (1) - imagine a Federal tax rate of 1%.

Clearly, the states would then have to handle more of the lower level administration but that may be for the best. Each state is different and must be governed differently. States with a large agricultural focus should have different policies than states with a large technology focus. States with a highly religious population should have different policies than the more atheist states. Under such a system, some states may end up doing better than others in the short term but if it becomes obvious that certain policies work, the other states would have adapt in order to compete, thus improving the US as a whole.

I believe that such a system plays on the strengths of the federal government as well as the strengths of local governments. It will still be easy to travel from state to state, use the same currency, and not deal with trade barriers but each state will have it's own social and cultural policies that reflect its population.

It just seems that the federal government cannot pass laws that will be beneficial to all states at once and so there is some form of a standstill. Maybe this focus on a more state-centered model is the approach to take.

In the future, I would like to take a look at the economic growth of the individual countries before the creation of the EU as well as after the creation of the EU adjusted for the overall growth of the world markets. I have a feeling it would show that the creation of the EU encouraged the growth of the individual markets.

Notes: (1) http://en.wikipedia.org/wiki/European_Union#Budget