There is an interesting proposal in The New Republic that liberals and libertarians should form a permanent alliance. As someone who is neither, I can look on this proposal calmly. Brink Lindsey, of the libertarian Cato Institute, notes that millions of libertarians, growing disgusted with the big spending Bush Republicans, voted Democratic this time. He argues that all actual libertarian progress, such as easy abortion and easy immigration, have come about through liberal means.
Still, he admits that the stumbling block is over the social safety net. Liberals, and especially those who think of themselves as progressives, are most devoted to a social safety net for everyone. Libertarians, on the other hand, want individuals to be responsible for themselves.
What was right about the conservative critique of liberalism in the 1980s was the honest discussion of how government entitlements created dependence and perverse incentives to be even more dependent. The great welfare act of 1996 was driven by this realization. This is the great bridge between centrist Democrats and centrist Republicans. The progressives among the former, and the libertarians among the latter, didn't like it.
Here, I think, is the great divide between liberals and libertarians. Liberals think the government should provide for irresponsible and self-destructive people. Libertarians don't. Liberals err on the side of making some people worse than they otherwise would be, in order to have a supported society. Libertarians err on the side of letting some people fail, even die, in order to make a society of stronger individuals.
I don't think the two can make a long-term marriage.