American politics has always been circumscribed by the tension left unresolved at the end of the Revolution between Federalists and Antifederalists, the big government conservative forces of Washington, Hamilton, and Adams, and the limited government liberal forces of Jefferson and Madison.
In the age of Reagan, conservatives celebrated Jefferson as one of their own. The fact of the matter is though that the notion of limited government was originally a progressive one in this country. There is a reason America's founding liberal Thomas Paine sided with Jefferson and Madison (who left the Federalist movement in part because of what he believed to be excessive ties to the business elite, especially around the issue of assumption) rather than Washington and Adams.
Jefferson wasn't just for federalism, and cuts in the federal bureaucracy. He also supported progressive taxation (which was why he endorsed Madison's tariff), government intervention on behalf of the middle class (see his 1803 letter to David Williams, or his 1816 letter to William H Crawford supporting government as "referee" in the marketplace, among other documents) and cuts in military spending. Jefferson opposed foreign interventionism, and stood for the strict separation of church and state. His support for civil liberties (the repeal of the Alien and Sedition Acts) and his concern about the executive branch exceeding the powers perscribed by the Constitution are looking like liberal positions today.
Jefferson was a rationalist, not a Randian, a left-libertarian not a Reaganite (although his ideals were closer in many respects to Mr. Reagan's than are Mr. Bush's; his limited actions against the Barbary pirates look particularly Reaganesque in retrospect, resembling more the bombing of Libya or the Democrats's preferred policy in the so-called war on terror than the invasion of Iraq).
Like Jefferson, I support limited bureaucracy, civil liberties, a balanced budget, modestly progressive taxation, leaving divisive (as opposed to settled) social issues to the states, and cuts (over time) in Pentagon spending. I also support a fair deal for the middle class (it isn't land grants and regulation of price gouging today that are the needed mechanisms, but preserving middle class entitlements and introducing a market-based national health care system among other things). That one also needs to state whether they support the rule of law and upholding the Constitution is an indication of how far we have fallen. For the record, I do. I am also a Democrat.
The process of transforming the Democratic Party from the party of big government liberalism (which it had been since the 1890s, when it ceased to be the party of Jackson) to the party of small government liberalism began with Carter (who fought the base unsuccessfully over issues like economic reform and fiscal responsibility) and gained ground under the DLC and Bill Clinton. By the time Clinton left office, Democrats had come to accept if not embrace markets, deregulation, limited bureaucracy and fiscal conservatism. Their support for major federal programs became results-based, rather than faith-based, in the best tradition of Jeffersonian rationalism. Bill Clinton may have failed to connect his own version of limited government liberalism (which was overly dependent on corporate dollars) with the base, but Mr. Bush's actions in office combined with the work of the netroots and others have turned the base even further toward Jeffersonian ideals. Over the past five years, Democrats have also come to stand strongly for civil liberties, federalism, the separation of church and state, respect for the Constitution and rule of law, and political and Constitutional reform (the introduction of net-based fundraising in small denominations will undo over time the Democrats' dependence on corporate and public employee union money) in no small part because Mr. Bush has trampled all over these things. Thomas Jefferson was arguably the founder of the reality-based community.
The Generation X Democrats are near complete Jeffersonians, supporting all of the above plus Second Amendment rights, and perhaps over time things like school vouchers as well. They are a breed of American political animal that has not existed in such pure form for almost 200 years. The limited government, federalist tradition of Jefferson was perverted by the politics of slavery and corrupted by the forces of plutocracy over time (it took Andrew Jackson and later presidents like McKinley to wreck Jeffersonian democracy; today's anti-war paleo-cons are a fairly modern species, dating back to the era of Harding and Coolidge), and it is only now recovering. It is good to have them back.
I hope that as the Democrats come to embrace the better angels of the Antifederalist tradition the Republicans come to embrace the better angels of the Federalist tradition. As it stands today, Mr. Bush has come to represent many of the worst aspects of the Federalist tradition, and few of the best.