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I don't think discussions of state capacity are very fruitful. It's too ambiguous of a term that it can mean practically anything. It's like a somewhat more intellectual version of talking about "bullshit jobs" or "strong men create good times, etc". You're not getting any actual rigorous analysis, you're just getting people grinding whatever axes they think apply, which will be quite varied due to the provocative ambiguity.
For "state capacity", you get people discussing basically any long-run issues the US has. Climate change, decline of manufacturing, health care cost disease, economic inequality, political polarization, rise of the New Axis (China+Russia+Iran), infrastructure decay, military decay + failed wars, racial tensions, national debt, etc, etc. You can list problems forever, as peoples' negativity bias means the news is more likely to cover them. On the other hand there are quite a few areas where the US is doing well: leader of innovation, solid economy, politically stable despite Trump, massive network of alliances, leading financial system, energy independence, etc. So a lot of the question is just doomer vs bloomer.
Then there's the question of how much the federal government actually engineers beneficial changes, which is ostensibly what the conversation is about in the first place. In practice though it's far too large of a question to really measure in it's entirety, and it's a much better idea to break it up into smaller chunks and evaluate specific policies. Overall, the US has probably lost some amount of state capacity from polarization, as it's effectively become a vetocracy in many areas (e.g. housing), although to some degree the totality of this issue is overblown.
I would agree with the limits of the term as you describe them, and add to this that 'capacity' is a measure of potential, not utilization. You can have capacity, and be inefficient in doing so. You can have capacity, and choose not to utilize it. You could change capacity by reallocating resources from other competing priorities- and this just broadens the question of what capacity specifically refers to in terms of 'capacity for what?' You can reassign personnel between organizations, but a skilled chemist is probably not going to make for a skilled software engineer even though 'capacity to analyze bioterrorism risks' and 'capacity to counter intercontinental missiles' are both functions of state capacity.
There's also a point that a lot of effective utilization of state capacity is, well, invisible by design and citizen preference. A voting (or non-voting) public doesn't particularly want to be accosted on the streets by policemen doing random searches. A state with sufficient state surveillance capacity doesn't need to- they can just monitor surveillance cameras / communications / informants, and tailor interventions to a narrower degree so that law-abiding people have less to notice. This takes a lot more capacity, and produces far fewer observables.
In a sense, it's comparable to people who complain online that no one builds impressive feats of engineering anymore. On cell phones with more computing power than Cold War space programs, over an internet that reaches over half the global population despite being mostly theoretical 50 years ago, and conveyed on ocean-spanning cable networks hidden beneath the waves. Just because you can walk through or over engineering feats without noticing them doesn't mean they aren't there. The same principle can apply to state capacity.
Very good points! Maybe state capacity is like that old adage about bathroom janitors: you only really notice them if they're not around to do the job. That doesn't mean they're not doing their job in the vast majority of other cases.
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