Welcome to the Backroom, Fiddling_nero! Great name.
Liberalism was once the left. Then the various socialist movements developed and pushed classical liberals to the centre.
The US has no meaningful communist, socialist, social democratic or Labour party. Hence, the Democrats took over the function that these parties fulfill in Europe, and combined them with the function of the traditional liberal party in Europe. These are conflicting demands. Through this, the Democrats changed from a proper 'Liberal' party to a semi social-democratic one.
The Republicans are America's extreme right, it's Christian-democratic, and it's conservative party all in one. The Republicans took over the functions that these parties fulfill in Europe. As on the left, these currents likewise have conflicting interests as well - some favour small government, or pro-business, or social prescripment of moral values, others not. They all winded up in one party, with confusing results.
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