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What's the alternative here? That the federal government be banned from attaching any conditions to any funding given to states? How would that even work?
The alternative would be to not hold funds hostage. You want bike lanes, pass a law making bike lanes and fund them. As a completely separate thing. What happens often is that the money for I.e highways is contingent on X miles of bike lanes. Or school funding rests on the enactment of policies like trans rights and trans students in women’s restrooms.
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Here's how it would work
The above is a link to Saving Congress from Itself which is a wonderful book by William F. Buckely's brother. In many ways, he was far more accomplished than his more famous brother.
Anyway, the TLDR is that Congress has to start doing top level only block grants to the state. State's bundle together all of the federal funding requests they have and send it to Washington. Congress votes on a straight YES or NO to providing that funding. If they want to adjust the number, they only adjust the top line number (say from $10bn to $9.5 bn or what have you). There's no ability to say "This $5m slice has to go towards the LGBTQ bike lane in downtown San Antoino." Nope, it's just one, big number.
The result is that states get A LOT more leeway in what and how they spend their money. Also, there would be less bureaucracy as the endless "reports" on the use of funds would vanish. The result of this result is you'd start to see states that are fundamentally run better probably attract citizens from other states. The results of that result (result depth level: 3) is that we'd probably end up seeing even more stark disparities in outcomes. For instance, most of the states with the worst obesity, illiteracy, and high school graduation rates are in the Deep South or are those with sparse populations generally (WV and one of the Dakotas, IIRC). I'd expect this to continue and accelerate with a "Block Grants Only" approach.
But the result of that result (!), I think, would be that some states effectively become giant national parks with almost zero population. West Virginia, for instance, is now a net mortality state, meaning that more people die and leave the state than are born / move into it. Eastern West Virginia, south of the panhandle that includes Martinsburg and Charles Town, is one of the least densely populated places in the country - it's literally up there with Montana and Wyoming in the lower 48.
Would this be a good or bad thing? That's up to you to decide.
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If you really want federalism, the federal government should be made to raise less taxes. Ideally the federal government shouldn't be able to tax citizens directly and should tax only the states. States would raise their own money to e.g. build roads.
Of course that's not really feasible either, not even if everybody really wanted it, because the federal government can print money or get loans from abroad, whereas the states cannot.
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