Figured I might as well start here (whats the worst that can happen?). Like I have said before I consider myself a proud liberal. However, I believe this word/label is over-used and no longer means what it is used to mean. I personally believe that the word should take from its Latin root - Liber. Thus I believe that a true liberal believes in their core in freedom. I also think that in order to allow such freedom, one must keep an open mind about other's beliefs.
If I say that I have the right to live my life as I choose, who am I to tell someone else how to live. Unfortunately, many who wear the liberal label these days, or are given it, are not willing to do that. This makes them fanatics, not liberals, no matter what causes they are fanatical about. As Nietzsche said "He who fights with monsters might take care lest he thereby become a monster."
I believe, however, that with freedom comes responsibility, and this is where government comes in. Unfortunately, it is the (apparent) nature of man that when presented with total freedom, what emerges is anarchy. Society cannot survive true freedom. Thus rules and laws are put in place which, if done properly, curtail some freedoms, but enhance the lives of all. I believe that a government is the right entity to create and enforce these laws, not for authoritarian reasons, but to protect the members of the society. This is why I believe the government's sole purpose should be protection of its citizens, both from outside dangers and from one another. Anything else the government does should be in support of these two goals.
This means that I think the government has the right to impose taxes. It has the right to engage in diplomacy with other societies/governments. It has the right to create a military. It has the right to create statutes prohibiting harm between members of its society. It has the right to try and prosecute those who break those statutes. These are the only reasons for it to exist.
It does not, however, have the right to restrain society members' rights unless the exercise of those rights infringe on someone else's rights. This is where the real trickiness comes in. A good pair of examples of this are the current debates over gay marriage and public smoking bans.
In the gay marriage debate, I believe that government oversteps its bounds when it says two people who love each other cannot be allowed to take care of one another just because they happen to share the same sex. One's ability to sign a contract saying they will take care of another, in sickness and health and everything else has no bearing, whatsoever, on anyone else's ability to do the same for someone else. I view civil marriage, which is all the government should be dealing with, as a legal contract between two people. Religions can ban gay marriage all they like; that doesn't remove a person's rights.
Public smoking bans, however, are a different beast entirely. I believe that the government does have the right to institute these. This is because when you smoke in a public space, you are, according to a large body of scientific evidence (and personal experience), causing others harm. Smoking where it is not going to cause innocent bystanders harm is your own prerogative; I think you should be able to do most anything you like to yourself. But when you involve others, unwillingly, in your personal choice, to their detriment, it infringes on their rights and government has the duty to say whose right takes precedence.
This is only scratching the surface, but I think I have bored you enough.