It's not a policy issue, just a statistical artifact.

From variance alone you'd expect the US to be middle of the pack, and smaller countries to make up the extremes on any metric you can make up. Particularly if, as in the case of the OECD, you're essentially cherry-picking high performing, smaller countries.

You can't usefully compare ratios where the denominators differ that wildly.

If you want to measure the difference between Canada, nordic countries, the US, etc., you need to cluster them into reasonably-chosen and mostly uniformly-sized chunks, collect your metric on each chunk, and compare the distribution of chunks across systems of government/countries/etc. This would actually result in a statistically valid comparison.

That's a lot more work and as far as I know nobody ever does it.

Yes. It's the "greatest country to ever have existed" but whenever it's behind in something it's impossible to fix that because it's too big, too diverse or something else.

> same levels of happiness,

Because, it's harder to be happy when you consider your money is being spent for 'those people' in Alabama, who are really nothing like you, than it is for you to be upset that your poor neighbor -- who you see everyday -- is benefiting from your taxes.

The United States is a conglomeration of sovereign entities, the states, and thus you see exactly the kind of disarray as you see in other supra-sovereign entities, such as the EU. While many member countries are certainly quite harmonious, with high standards of living, the quality among countries is quite striking, as is the general distaste whenever someone suggests wealth transfers between them.

Canada is also a federation, but, there's so few Canadians, and most of them have a common enemy -- the Quebecois.

Taking it further, does this mean we should break the country into a bunch of small ones so we can all be better off?

We wouldn't all be better off. We would just end up comparing Maryland or Massachusetts to Switzerland and Sweden.

Effective policy needs to reflect local conditions, including geographic, economic, cultural, and demographic factors, which vary enormously when the population spans 5000 kilometers as is the case in the US. As a consequence, there is a long history of national policy adversely impacting or being ineffective in some large region of the US because the "one-size-fits-all" policy was poorly suited to local conditions. The US has struggled with this its entire history. Individual States have geography and populations that are more in line with European countries, hence why most policy is decided there.

You see this even with relatively boring policy, like setting a national speed limit for driving.

This does not imply that local policy is always effective in the US, the reality is that it varies widely depending on where you live in the US and must also operate within certain practical and legal constraints. There are also many perverse interactions between national policy and state policy.

One reason is that quality of life improvements often manifest as some form of technological infrastructure (housing, medicine, goods, roads, clean pipes, etc.).

Population matters less than investment per capital per unit area (because people take up real space).