A theory for time correlation functions in liquids is developed based on the optimized quadratic approximation for liquid state potential energy functions. The latter approximation leads to the rigorous mathematical definition of inherent structures in liquids and their vibrational fluctuations, in turn leading to the concept of inherent normal modes in the liquid state. These normal modes are called "optimized normal modes." Unlike normal modes based on instantaneous liquid state configurations, the optimized normal modes are stable, having real-valued frequencies, and each inherent liquid state structure has a different set of modes associated with it. By including a single phenomenological decay function which captures the average transition rate between the different sets of normal modes, velocity time correlation functions and dynamical friction kernels for solute bonds can be predicted in good agreement with direct molecular dynamics simulation results.