The right answer is to build a "safety-net" into a new "progressive flat-tax" that is far more progressive than the current code. Progressivity in the code would be funded not only from tax deductions, but by abolishing means-testing programs, and incorporating a portion of current Entitlement payments.
Once we have a "safety-net" that brings base income up to the poverty-line, we can then talk about privatizing the remaining 2/3 of Entitlements. If the "blue" states want higher safety-net levels, let them fund it.
Graham's idea of building more incentive destroying means-testing into our entitlement programs is awful.