I think the context is highly important there. Billie isn't using the term himself, he's putting it in the mouths of the people he's villifying. It's actually a rather prescient lyric—look at the Ferguson situation last year, the response from a lot of people was basically exactly that line, in intent if not exact wording. If Billie himself were to call black people that word, it would be horrible and offensive, but he's using it specifically as something that other people are saying, as a device to show how fucked-up and outrageous they are.