Yes. It is borderline racist and culturally demeaning.
It starts off on the wrong foot for me though, because it's a "joke" about terrorists, and I don't find terrorists to be a funny subject. And I get really eeky about the implication that every Muslim is a terrorist or supports terrorism. That's like implying that every American Christian is a KKK member or supports them. Or every German is a Nazi sympathizer.
Picking it apart...not all of it is that bad. And I tried to figure out what the defining line was for me. I'm not sure, but I think the line is crossed when you stop poking fun at yourself and start insulting the other person/culture. It's not uncomfortable when you say look, those poor guys have no Christmas, no Playboy, no pork BBQ, no TV sports, they are stuck with multiple wives (and multiple mothers-in-law!) -- because you are making fun of the Western way of life and our society, as if those kinds of things define our culture and who we are. Yep, we Americans all sit around drinkin' beer in our trailer parks, spittin' tobacco through our remaining teeth, collectin' our welfare checks while we watch Jerry Springer and Nascar. But when you start insulting them -- they smell, their wives need to shave, etc. then it becomes racist and culturally demeaning.
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