I am making an argument, at this point, that the state must profess the true religion. Not for monarchy, not yet at least. When Pope Leo says:
"This, then, is the teaching of the Catholic Church concerning the constitution and government of the State. By the words and decrees just cited, if judged dispassionately, no one of the several forms of government is in itself condemned, inasmuch as none of them contains anything contrary to Catholic doctrine, and all of them are capable, if wisely and justly managed, to insure the welfare of the State"
Secular is not a "form" of government. There are bascially 4 forms of government, according to Aristotle and accepted by St. Thomas:
1) Monarchy
2) Aristocracy
3) Democracy
4) Tyranny
This is the "form" of government.
Pope Leo is saying, and I agree that, in theory, any form of government is acceptable as long as it professes the true religion. In theory, any of these could be confessional states.
Monarchies, historically are confessional states. I don't know of a secular monarchy, nor given the political theory of monarchy is one possible.
Republics - whether aristocratic or democratic (plebscite)- could be confessional states. The Republic of Venice was a confessional republic (of the aristocratic variety).
Tyrannies can be confessional states. Strictly speaking Franco's Spain would be classified, by Aristotle, as a tyranny and it was confessionally Catholic. (BTW, this is not a negative judgement of Franco, I like him)
Prudence is the highest natural virtue (according to Aristotle and St. Thomas).
So the question becomes, which form of government is the most prudent choice given the absolute requirement of a confessional state?
Now, using reason and experience, I could argue for monarchy :)
When Pope Leo writes:
"The Church, indeed, deems it unlawful to place the various forms of divine worship on the same footing as the true religion, but does not, on that account, condemn those rulers who, for the sake of securing some great good or of hindering some great evil, allow patiently custom or usage to be a kind of sanction for each kind of religion having its place in the State."
It has to be read in context with the rest of the encyclical as well as in context with other writings. This means you don't have to ban the practice of other religions, if you have a good reason. Such as securing the peace and maintaining order in society. But what is the "place" of such religons in the State?
They may be privately practiced, but not publically professed. Gregory XVI wrote in Mirari Vos:
"This shameful font of indifferentism gives rise to that absurd and erroneous proposition which claims that liberty of conscience must be maintained for everyone. It spreads ruin in sacred and civil affairs, though some repeat over and over again with the greatest impudence that some advantage accrues to religion from it. "But the death of the soul is worse than freedom of error," as Augustine was wont to say.[21] When all restraints are removed by which men are kept on the narrow path of truth, their nature, which is already inclined to evil, propels them to ruin. Then truly "the bottomless pit"[22] is open from which John saw smoke ascending which obscured the sun, and out of which locusts flew forth to devastate the earth. Thence comes transformation of minds, corruption of youths, contempt of sacred things and holy laws -- in other words, a pestilence more deadly to the state than any other. Experience shows, even from earliest times, that cities renowned for wealth, dominion, and glory perished as a result of this single evil, namely immoderate freedom of opinion, license of free speech, and desire for novelty.
15. Here We must include that harmful and never sufficiently denounced freedom to publish any writings whatever and disseminate them to the people, which some dare to demand and promote with so great a clamor. We are horrified to see what monstrous doctrines and prodigious errors are disseminated far and wide in countless books, pamphlets, and other writings which, though small in weight, are very great in malice. We are in tears at the abuse which proceeds from them over the face of the earth. Some are so carried away that they contentiously assert that the flock of errors arising from them is sufficiently compensated by the publication of some book which defends religion and truth. Every law condemns deliberately doing evil simply because there is some hope that good may result. Is there any sane man who would say poison ought to be distributed, sold publicly, stored, and even drunk because some antidote is available and those who use it may be snatched from death again and again?
16. The Church has always taken action to destroy the plague of bad books. This was true even in apostolic times for we read that the apostles themselves burned a large number of books.[23] It may be enough to consult the laws of the fifth Council of the Lateran on this matter and the Constitution which Leo X published afterwards lest "that which has been discovered advantageous for the increase of the faith and the spread of useful arts be converted to the contrary use and work harm for the salvation of the faithful."[24] This also was of great concern to the fathers of Trent, who applied a remedy against this great evil by publishing that wholesome decree concerning the Index of books which contain false doctrine.[25] "We must fight valiantly," Clement XIII says in an encyclical letter about the banning of bad books, "as much as the matter itself demands and must exterminate the deadly poison of so many books; for never will the material for error be withdrawn, unless the criminal sources of depravity perish in flames."[26] Thus it is evident that this Holy See has always striven, throughout the ages, to condemn and to remove suspect and harmful books. The teaching of those who reject the censure of books as too heavy and onerous a burden causes immense harm to the Catholic people and to this See. They are even so depraved as to affirm that it is contrary to the principles of law, and they deny the Church the right to decree and to maintain it."
And in fact the first amendment of our Constitution enshrines exactly this error. Cardinal Newman wrote "God save us from the freedom to err".
Pope Gregory did not envision television or even radio which carries these errors to every man even more potently than the printed word (since the dominant senses of man are sight and hearing). In the age of plebscite democracy, all you need to manipulate the masses and secure power is a good propogandist (euphamistically called "press secretaries" these days)
Heresy is error, error is sin, heresy is sin. Sin causes a darkening of the intellect leading to more error, etc.
So "freedom to err" is a contradiction in terms for Christ said "he who commits sin becomes a slave to sin".