Have people really lost sight of liberty so much?
Yes. They get too emotional about casualties in the name of freedom and opt to restrict what other people are able to do. They cannot handle even a single loss, and they don't even realize that their 'solutions' will often not even solve the problem.
This is why some people support the TSA and the Patriot Act. "We must restrict everyone's rights in exchange for a bit of safety." It's just that there are different things that they want to sacrifice freedom for. In some cases, it's terrorism (restricting people's rights to "stop the terrorists" doesn't seem popular here). In some cases, it's children (I've noticed this is more popular here, especially when it comes to issues like child porn).