Stanley Fish has written on the inability he perceives liberalism to have in having tolerance for religious faith. My meager response follows:
There is actually an older source than either Milton or Mill for the notion of separation of church and state: Jesus of Nazareth. He said, "Render unto Caesar what is Caesar's and render unto God what is God's." (Matthew 22:15-22; Mark 12:13-17; Luke 20:20-26)
2000 years before Stanley Fish, Jesus was able to point out the fallacy of Professor Fish's argument. Professor Fish assumes that religious inquiry and political action are activities that exist in the same sphere: public. However, the realm of the spirit is inherently private and personal, and while it will undoubtedly influence the political and public outlook of an individual, it is not and should not be a public expression in and of itself.
Jesus is also the best source for wisdom on what to make of those who would move their spiritual quests from the private realm to the public: "And when you pray, do not be like the hypocrites, for they love to pray standing in the synagogues and on the street corners to be seen by men. I tell you the truth, they have received their reward in full. But when you pray, go into your room, close the door and pray to your Father, who is unseen. Then your Father, who sees what is done in secret, will reward you." (Matthew 6:5-6) The meaning here, to me, is clear. The TV preachers, the Ayatollahs, the President who sees his administration as being ordained of God are all hypocrites. By making their spirituality (if true spirituality it be) so needlessly public, they subvert it.
For it is possible to be spiritual and political and to keep both in their proper place. In that case, spirituality and even adherence to a set of particular religious dogmas can be a helpful and healthy thing. The private informs and illuminates the public. Unfortunately, the reverse is quite often the result of mixing the two, and the public political ideas come to dominate the personal and spiritual.
Professor Fish does, though, discuss a difficult sticking point for many who would identify themselves as "liberal." As tempting as it is to sometimes wish to deny others free speech because we believe their religious and political beliefs intolerable, we cannot. For when we do, we are the hypocrites praying on the street corners. Even those who understand religion to be a sword rather than a balm must be allowed to speak, and we must try to engage them with rationality, regardless of the frustrations involved in doing so. It's not easy, but that's how it is.
Finally, if Professor Fish does not think that George W. Bush is a religious extremist, he is living in a fantasy world. His entire description of the balancing act he claims that American politicians have to walk is absurd and indicates that he must have been either unconscious or sequestered during both General Elections in 2000 and 2004.