I've thought about this for a while but my thoughts were brought more into focus by Claytons post here http://mises.org/community/forums/p/32407/503723.aspx#503723
The federal government is a commons, I don't think all our politicians are evil idiots, they are driven by incentives to acting like evil idiots. How does a local politician get ahead? By doing good for his locality, by getting money from the city. A city politician does the same by getting money from the state. A state politician by getting money from the federal government, they each benefit their constituents at the expense of the whole. The entire setup is a tragedy of the commons, with one difference, the commons isn't a static size, its scope can and has grown to the point that it will impoverish everyone.
All that is needed to change the incentives is to (re)reverse the flow of funding from top down to bottom up. If funding came from the bottom, the commons still exist, but there are thousands of smaller commons competing with each other. Some localities might choose to be welfare states, some might have free healthcare, some may be almost completely libertarian, aside from what they must collect for the higher levels of government, but they are all competing with each other, they all must compete to create societies that make their constituents better off (in whatever way they choose) to attract more constituents for more power. While calling local politicians union leaders is a marketing ploy to appeal to leftists in my mind, in the system that would ensue that is exactly what they would be.
If we are correct this would lead to a complete reversal of the tendency of governments to grow out of control. Libertarian localities competing on an equal field with collectivist ones would quickly display the benefitsof libertarianism, but maybe not, maybe there are some things that we are wrong about, but at least now people are free to choose the governance they desire, not completely they still have to move to a different locality, but not a different country, planet, or into the ocean.
There are stumbling blocks, the US Constitution wasn't able to keep things this way, this would likely lead also to a tendency for localities to try to merge into larger entities to make it harder for their constituents to vote with their feet.
Do you see other unintended consequences that I'm missing?
Any ideas to make this look more beneficial to leftists? I think that the biggest stumbling block for popular support would be leftists calling it a move for "states rights" and a return to slavery unless the union angle or something else could be expanded to make them more supportive.