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I associate "liberal" with two things. First, Adam Smith and other pro-free trade ideologues, wholly discredited by the course of human history, are economic liberals in the classical sense. Second, warmongering, anti-people Democrats like Scoop Jackson were liberals.
I think that American liberalism was irreparably damaged by its capitulation to red-baiting McCarthyism during the 50s and 60s, when unions and others went in big for the criminal war against Southeast Asia. The "New Left," for all its weaknesses, emerged in order to address the vacuum created by the liberals' abandonment of progressive standpoint in relation to the whole world. Social Democrats USA, to me, exemplify this Cold War Liberalism, with their current support of the Iraq aggression and other neo-conservative policies, only they would allow for unions unlike their openly rightist counterparts.
The newer generations of progressive activists do not identify with liberalism, in part, because of this controversial legacy. They are more apt to identify with the political legacy of the New Left, which was arose in direct conflict with liberalism. What is happening that's positive is that the AFL-CIO has abandoned its anti-immigrant, pro-foreign aggression policies and returned to a progressive position. But I don't think that "liberal" is salvageable in the long term as a notion with which many people will identify.
I think "progressive" is a better, more inclusive term. It includes progressive self-identified liberals, socialists, social democrats, other leftists and so forth, who share a common commitment to the general welfare.
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