First idiot in is a liberal (7)
I believe the answer is:
initial
'first' is the definition.
(similar in meaning)
'idiot in is a liberal' is the wordplay.
'idiot' becomes 'nit' (nit can mean a stupid person).
'in' means one lot of letters goes inside another.
'is' becomes 'II' (more than one I).
'liberal' becomes 'l' (abbreviation).
'nit' placed into 'ii' is 'initi'.
'initi'+'a'+'l'='INITIAL'
(Other definitions for initial that I've seen before include "E in Eileen" , "First letter of a name" , "Relating to the beginning" , "Original; beginning" , "First - opening" .)