A democrat (small d) is someone who believes in democracy. Which is a liberal thing. A Democrat (capital D) is a member of the Democratic Party. The Democratic Party used to represent liberal ideas, but now it's just controlled by Big Money, like the other party.
Republicans use the L-word for anything they don't like or anyone they disagree with. They often talk about liberal Democrats as if Democrats were all liberal. They call them 'liberaldemocrats', because, of course, they disagree with Democrats so Democrats must be liberal. But the Democratic Party today is actually more conservative than even Republicans were before the "Reagan Revolution".
When Newt Gingrich called President Clinton 'the most liberal president in US history', all he really meant was that he really didn't like Clinton. In fact Clinton wasn't really liberal at all, except he was a little more liberal than the Republicans. Obama is about the same.