I've referenced this quote nearly every time I've written about dog-whistles and the Southern Strategy, but I've never heard a tape of Lee Atwater, the proto-Rove of the Reagan/Bush era, actually saying the words.
The Nation discovered the tape:
You start out in 1954 by saying, “Nigger, nigger, nigger.” By 1968 you can’t say “nigger”—that hurts you, backfires. So you say stuff like, uh, forced busing, states’ rights, and all that stuff, and you’re getting so abstract. Now, you’re talking about cutting taxes, and all these things you’re talking about are totally economic things and a byproduct of them is, blacks get hurt worse than whites.… “We want to cut this,” is much more abstract than even the busing thing, uh, and a hell of a lot more abstract than “Nigger, nigger.”
In other words, why risk losing voters with "nigger" when you can use coded language that your target demographic understands as the equivalent to "nigger?"
Hence, Mitt Romney and Newt Gingrich made a big deal out of food stamps and welfare -- not "nigger, nigger" but these lines of attack speak directly to racially resentful white voters. Romney also used "foreign" to describe the president's policies, most recently in the second debate. And who can forget the "Obama Isn't Working" banner? All Atwater-style dog-whistles.
As long as the Republican base is made up of white Southern men, this will always be a part of its political textbook.