I'd be happy with CK2 council mechanics and leader election for federation... or EU4 HRE mechanics that allow gradual centralization of federal powers.
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So don't use Federations. I'm sorry you don't like that they have downsides and aren't just outright OP. If the US lost a war with Mexico (dunno how that would happen, but what if...) and California was a demand of Mexicos then CA would have no say in whether it stayed in the US or was conquered by Mexico, only the US and Mexico are the deciders.
I'm not a fan of having a game mechanic that makes the player a totally passive entity in such a major area of the game. That's not a downside - it's just boring for the player, because you can't fight it. There's literally nothing you can do about it, making it frustrating and bad game design. It's solvable, of course :
- One solution would be to change the elections, so that a player can actively try to be president as often as possible - in which case your inability to do diplomacy when you fail to win the election seems a decent enough punishment. You could copy CKII's republics (bribe your way to the top), or EUIV's HRE election mechanic (make the federation members love you).
- A second solution would be to be able to influence the president's diplomatic actions. Threats, bribes, chantage, promises... could be used to make you get that one war you really need to get going.
- A third (and probably the easiest, but also less 'classy') solution would be to let the player declare wars, but only involving their own Empire, not the Federation. That way, you'll only be able to access you 'superweapon' (Federation Fleet) once every blue moon, but you can pick on smaller targets in the meantime. It does however dissolve that feeling of 'we are one entity now'...
Do I think they're going to redesign it this close to release ? No. It would be crazy, in fact. However, I do hope the current system won't stay in place, because as long as it is, being in a Federation will just be annoying. It makes players totally unable to access a major component of the game, for 80%+ of the time.
TL;DR : You should never take away something from the player (even more so when it's something as huge as diplomacy) without giving them some (difficult ?) way to get it back. This mechanic is just not engaging gameplay, and definitely needs changing.