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We don't need to have a system where there are only 2 terrible choices.

if the federal government wasn't so large but rather a looser organization such as the EU, then each state would be a sovereign entity and the presidency wouldn't matter so much. then you would have 50 or more choices (50x2=100)

You look at Europe and seriously want that?
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I live in Prague but travel often to the DC area for business. I’d choose to live in Prague in about 70000 out of 80000 simulations.

It just feels better to live here for many reasons (safety, culture, nature, walkability, quality of restaurants and clubs and overall you don’t see many poor people around). Europe has economic issues but the quality of life is very high most of the time.

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This is already the case. American states have a lot of latitude in setting policy and governing themselves.
ranked choice voting!
It's an interesting idea, but it's more or less been tried.

The conclusion of that experiment was that half of the country would gladly go to war to force the other half to stay as one country. I don't think that has changed. Especially given that the primary political divisions aren't between state lines; They are rural and urban divisions.