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Why are they called "Liberals?"

Why are Democrats sometimes called "liberals" as though the two words are interchangeable? I feel like there might be a perfectly reasonable, and possibly even obvious, historical explanation for this but I am unaware of it.
Liberal. Liberty. Freedom. Shouldn't the word "liberal" be used to refer to people who want to increase freedom?
Republicans can be liberal or illiberal. Democrats can be liberal or illiberal. This is Jonathan Haidt's assertion as well. Why do we refer to liberals whenever we talk about Democratic policy?
Also, it was my understanding that Democrats were in favor of a bigger government. Bigger government means less freedom so, again, why do we call them liberals? Am I missing something?

BFrydell 5 Mar 15
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The concept of Classical Liberalism began in the late 1700s during the Age of Enlightenment. The core principles were: 1) Liberty as the primary political value; 2) Individualism; 3) Skepticism about power; 4) Rule of Law; 5) Civil Society; 6) Spontaneous Order; 7) Free Markets; 8) Toleration; 9) Peace; 10) Limited Government. This sounds like the core principles of Conservatism to me. It appears that the left wing has merely appropriated an inspirational term and dismissed its original meaning, which is a common "Progressive" tactic.

I'm beginning to see conservatives refusing to refer to leftists as "liberals" because of this. Likewise I'm beginning to see the term "Nazi" replaced by "National Socialist" - the original term. Hopefully we can one day restore words to their original meanings without confusing too many people. Words are important.

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Freedom of speech for reprehensible people, sex on TV, anti-homosexual laws de-legislated, ... issues that were resisted by conservatives and promoted by progressives. These issues are also all liberal issues. In 1988 the Democrat presidential candidate referred to himself as a "liberal." Bush leveraged that term against him calling him a card carrying ACLU member.

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Socialists/Communists in America hide behind names like Democrat and 'liberal', and use the term liberal because they like being liberal with other people's money and freedom to empower themselves, blocking your own empowerment.

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While some are/call themselves liberal, nowadays I hear more of them (the Democrats) being called "progressives". The other reason they might be called liberals is due to the fact many Democrats are socially speaking liberal, in the sense that they are for equal rights for homosexuals/they are pro choice when it comes to abortion etc. Just my take on it.

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