My limited understanding of the States Rights argument is that proponents want to switch to a system where each US state has high sovereignty, with only some functions transferred to the Fed, notably the currency, military, etc, and some limited cases where it's useful for the Fed to promote cooperation between the states.
Ignore the military for a moment, let's focus on the economy.
Excluding Britain, isn't that pretty much a description of Europe? Is the economic side of this system working there? If not, why?
(BTW isn't it somewhat ironic that the people who are usually the loudest advocates of this system would be the most offended if they heard the concept described as "European"? Of course, they'd rightly argue Europe was inspired by the US, not the other way around, but I thought I'd throw that out there.)