And it isn't all Rodgers. I think he's making the squad look worse than it actually is with his formation/management, but at the end of the day the squad isn't filled with players who are top-of-the-league quality. Of the 3 best players of the last 3 years -- Suarez, Sterling and Sturridge -- 2 no longer play for Liverpool and 1 basically missed the last year. What's left is a collection of average to pretty good players but if you look at Liverpool players on an individual basis there's not really anyone that you would say is best at their position or perhaps even top 3 at their position in the league, other than arguably Coutinho and Clyne (and perhaps Sakho, but since he doesn't start . . .). And that is a problem.
In defense, Clyne would probably start for some of the top 5 squads, and Sakho probably would too. Migs, Skrtel, and Moreno would not. In fact, in some cases there are numerous players for the "lower" teams that I consider better than the starter for Liverpool. For example, Skrtel doesn't start over Smalling or Kompany but also would not start over Stones. Migs isn't a terrible keeper but he's looking shaky again, especially in distribution, and I would prefer any of the other top 4 teams' keepers along with Lloris.
Liverpool's MF isn't "bad" but it is pretty pedestrian. Henderson might be in the conversation to play for some of the other teams but it isn't clear to me that he's good enough to start in the MF of Arsenal, Chelsea, City or ManU. Milner would be a squad player and Can and Lucas probably wouldn't be in the match day squad for most. Liverpool still have completely failed to replace Gerrard's dynamism and don't have an adequate DCM.
With respect to attacking players I would love to have Hazard, Sanchez, Sterling, Depay or Willian. Liverpool don't even have any true wing players right now, other than Ibe, and he simply doesn't look ready to be a contributor on a daily basis. Coutinho might start for some of these teams - ManU for example seem like they could really use him -- but Ozil and Silva are both currently better. Up top Sturridge and Benteke are both very talented, and I'd take them over Rooney and Giroud but not Costa or Ageuro. Firmino hasn't shown me anything yet, though I get the sense he's probably not being properly utilized by Rodgers. Lallana probably would be on the bench for any of the teams that are challenging Liverpool for top 4 but wouldn't start for any of them. Ings and Origi might make the bench for some of these teams but probably not.
So in my mind what you've got is a solid if uninspiring team that cannot afford to have its best players -- Coutinho, Henderson and Sturridge -- injured or missing because of red cards and cannot afford to have its best CB overlooked by the manager.