We could also collapse the yes/no questions with better voting systems, something not first pass the post.
While local government is totally necessary, I don't think we can afford to not have big government. If wind currents made air pollution a non-issue in say, Ontario because wind currents blew it all down to Nebraska, how would we deal with that? Many of our most pressing societal problems live at the interstate or international level and need a corresponding governing body.
You most certainly could not have big government, in that scenario each state would be its own sovereign nation.
It's a very popular theory that smaller polities have better governance. Picking single examples would maybe not capture it but I'd think of NZ vs Aus, Ireland vs UK, Switzerland vs France, or even Canada vs USA. (All pairs picked to have similar location in the world, but I guess you want to say the (former) empires of USA, France and the UK put them in entirely separate categories..)
Not necessarily "better" governance, because that's very dependent on what "better" means to you. I think you can make a strong argument that federalism results in governance more closely matching the will of the people — to the extent that the will of the people can be captured by representative democracy.
The subtle mechanism behind most problems in public policy today is collapsing of decision tree into just one yes or no answer (red/blue) that IMO is killing the nuanced policy development (or more accurately used by politicians to do whatever half-aed measures they can come up with). having smaller units also help with even more meta-manipulations like gerrymandering so prevalent in US. if we want to hold congress accountable for their constituents this is pretty much the only sustainable path to it. Until this happens IMHO most good policies will continue to be lost in poor/unimaginative implementation.
ref: https://mises.org/wire/us-should-have-10000-members-congress