It appears that Michelle is somewhat upset over a high ranking California politician using the word “cracker” to describe San Diegans who wish to deny civil rights to immigrants. Capt. Queeg has reduced himself to calling it a “racial slur.”
I use the term myself: on this blog and in everyday conversation. I generally don’t follow the accepted denotation of the word, i.e. “poor white Southerner,” but in the sense that Malcolm X used it, namely “white racist,” especially the potentially violent variety. Therefore, I do not consider the word to be a “racial slur,” but a “racist slur,” or a pejorative meant to attack the racial bigotry of an individual or group.