[quote=So Boerd]1. Security concerns. Your micro democracies are essentially unable to defend themselves, so very rapidly if not actually reform the United States they will make alliances and engage in offensive-neorealistic conquests. The United States today is without peer, consequently, we don't engage in "War of the Spanish Succesion" style wars of containment, nor do we constantly subjugate like Napoleonic France. When we had ONE peer in the USSR, the world was worse as a result.[/quote]
The political climate isn't the same though. These micro-democracies would have access to modern technology and education, and relations with each other in a way similar to the UN. Conquest doesn't happen today because conquest is expensive and generally looked down upon by people, especially toward democracies.

[quote=So Boerd]2. Identity politics. The more identities there are, the harder it is to appease enough of them to ride them into power.[/quote]
I think that's a problem big and small governments would face.