Classical and Modern Liberalism

I have read with much interest a series of posts over at National Review's Corner starting with
this one about Alan Wolfe's column on liberalism. What I find interesting about them is that I had always presumed that honest modern liberals admitted, at least to themselves, that Wilson, Taylor, Dewey, and the rest of their progressive ideological ancestors made a fundamental break from Smith, Paine, Jefferson and the other fathers of Renaissance liberalism.

I see an obvious example to this in Hillary's campaign statement that the word "liberal" "originally meant you were for freedom... that you were willing to stand against big power and on behalf of the individual." Now clearly Hillary intended to imply that she was for freedom and against big power, but it's equally clear that modern progressives are for no such thing. The root of progressivism, which both Clinton and Obama embrace wholeheartedly, is that nearly all problems can be solved if you give the government enough power and have the right (naturaly Clinton and Obama respectively) people at the helm. It necessarily follows from giving the government the power to solve all problems that it also has the power to circumscribe all individual rights.
You cannot think that "liberal" classically meant "for freedom and individual liberty" and simultaneously think that modern liberalism is the same as classical liberalism.

Wolfe, unfortunately, does not explain what he thinks classical liberalism meant, but he does make it abundantly clear that he does not accept a break between it and the modern version. The members of The Corner, however, speculate on how one can naturally flow from the other end culminating in these two posts. I find this fascinating. It had never before occurred to me that Toryism (or, if you want "classical conservatism") was primarily concerned with the maintenance of the divine right of kings and thus both modern conservatism and modern liberalism flow out of the rejection of it. It does, however, once again underline to me that the difference between the two world views is best expressed in the difference between Locke and Rousseau (both Enlightenment thinkers) and their treatments of Hobbes's state of nature.