Both really good points. First, I'd mention that lots of polities are pretty shitty right now in a variety of ways, and yet (mostly) continue to be left to their own devices. True injustice gets the citizenry's gander up to be sure (and rightfully so!), but there doesn't seem to be much agitation for the Federal government to dictate to failing cities like Detroit or to crummy school districts in Kansas where they don't teach science when they don't like what it says.
As to corruption: I agree that state governments are more corrupt, but I still like the tradeoff. In a hypothetical world where state and local governments had more power (read: more money directly under their control), I'd hope that the media and the voters would pay closer attention. Probably a dream, but even so, just because a system is less corrupt doesn't mean it's making better decisions. A bureaucrat in Washington can have great intentions, but if he screws up badly, it's the whole country that suffers the consequences. Most importantly, there's no way to explore the counterfactual of a nation without that bad decision having been made. Obviously states and localities never provide perfect "controls" in the laboratory of democracy, but watching the future of, say, Texas vs. California will provide us with some good notions about the practical effects of very different views of the role of government.
I'm not really arguing for a wholesale devolution of power. I have no problem with the Feds continuing to build highways and run the FDA. But the extent to which state governments (mostly voluntarily!) are becoming addicted to a range of "free" Federal aid and its associated strings is a bothersome development.