We do not have a government for the sake of having a government. Further, I cannot see how one could measure the efficacy of a government merely by it's ability to exist.
The union couldn't exist as a loose coilition of independent states for the exact reason you stated for SC's withdrawal.
Allow me to amend. The Union could not exist as a consolidated government overreaching it's limited powers and taxing the citizens of some States for the benefit of others because South Carolina, and any other aggreived State could exercise the principle of secession as spelled out in the Declaration of Indepedence.
Do you really think think this? Every state it's own country?
I believe it's the only hope for killing the Leviathan state we have now in Washington D.C. The actions of the Congress and Presidents in the last century have nullified the 10th amendment. They recognize no limit to their power. The only recourse to their usurpation is secession. I've no problem with entering mutual defence and free trade treaties between Florida and California (and everywhere in between), but I'll be damned if I want the California politicians continuing to meddle in my State's affairs. Better to have 50 functioning Republics operating under the umbrella of free trade, mutual defense, and free travel. The eco-whackos in California can mandate all the silliness they want - for themselves. I suspect such an arrangement would also engage in a lot fewer wars, and thereby waste a lot fewer American lives and dollars.
I had to think about that for a bit. It's an interesting thought, but I don't think it's true. While I agree with your sentiment regarding the inherent abuses of power associated with federalism, I'm not sure they wouldn't be reproduced on a smaller scale by each of the 50 states.
We have to have some form of government, and it's ability to exist is fundamental to it's selection. Take communism for example. Assume for the sake of argument that we thought it a desirable form of government. (I personally think it's the worst idea of the 20th century, but I can see how people might be seduced by it's utopian idealism. What amazes me is people still cling to it, despite it's track record of death, misery and corruption. But that's another subject.) The human race spent a century, and about 100 million lives to demonstrate that it is an absolutly unworkable form of government. It doesn't matter how much we would want it, we simply can't have it becasue it's unworkable.
That's the only thing I was suggesting about loose fed, strong state; the civil war may have demonstrated that strong state is unworkable.