President Obama’s remarks about what it is to be an African-American in America have disturbed those who prefer to believe our nation is color-blind. That was always a myth, like the notion we are a “melting pot” of nationalities, all heaving together toward a common end. Even in New York, the most cosmopolitan of cities, racial groups tend to keep to themselves and differences survive across generations.

The president’s description of how it feels to be a black man in America — routinely suspected of being a criminal, followed around stores by security guards, hearing car doors lock as he crosses the street, watching women clutch their purses tight in elevators — chime with similar experiences related by others set apart from the rest by dint of their skin color.

You can hear the same sorry stories from black visitors to America, shocked to discover that here, far from being a true democracy where everyone is treated the same, it is common for taxi drivers to ignore them, or bars to serve them last, or for public officials to treat them badly simply because they are black. This soft apartheid in America has been brought to the surface by the death of Trayvon Martin. It is a salutary fact that even the most powerful man in the world is treated with suspicion in his own land simply because he is black. After 50 years, Rosa Parks has yet to finish her journey.

There are black racists, too. The most virulent racist I have ever heard was a hostile young black Baptist minister in Harlem convinced that America is run by a secret cabal of Jews. But the president’s comments have primarily exposed deep fissures among conservatives. In all conservative economic theory, from Adam Smith to Friedrich Hayek and beyond, the market operates without prejudice. The price curve has no third dimension of race. In practice, however, many advocates for the free market believe it is legitimate to treat people differently because of their color.

Black conservatives find themselves in an unhappy position anomalous to gay conservatives, or “Log Cabin Republicans,” during the tempestuous debate about gay marriage, and have discovered that a rift has opened between them and their white counterparts. After I suggested that the Martin killing was largely about race, one prominent black conservative told me about a reaction to his blog post that also cited race as a key factor in Martin’s death. “As ours is an almost exclusively conservative audience, the reaction to it has been overwhelmingly hostile,” he wrote.

There is a concealed conservative chasm between out-and-out racists, who to maintain any form of standing in respectable society keep their true natures hidden, and those conservatives who when it comes to racial hatred simply cannot or prefer not to see what is going on. The racial bigots are usually sly enough to keep their views to themselves, or carefully cast an ambiguous line into conversation to test whether their racial assumptions will be tolerated before letting rip. Appeasers of racism make ever-ingenious excuses for their racist friends and affect not to understand when racism erupts before their eyes.

It is the fellow-travelers of racism who do not wince when they hear a racial slur and who insist they cannot grasp the racial nature of crimes like the stalking and slaughter of Trayvon Martin. Here is one otherwise rational economist, an alumnus of the Massachusetts Institute of Technology, no less, who says he lives in “the poorest North Carolina county which has a more than 50 percent black population.” In response to my description of the Zimmerman trial as being “about race,” he wrote, “You do damage to U.S. race relations by writing opinion pieces based on uninformed and unrealistic views. You could do your part by avoiding false claims, by not fanning flames of ‘victimhood,’ and by promoting the positive attributes of our black citizens and brothers.”

When I pushed back, he conceded, “I do agree with many of your views. Many U.S. cities have ghettos. Some groups dismiss others in vile racial terms. Use of English and accent do delineate ambitions. (No matter which race.) America presently does have at least two lower or under classes based on race.” Yet he still strangely concluded, “I do NOT believe that America is riven by race.”

I wonder what this reasonable fellow felt on hearing the president insist that, in his own personal experience as a black man over 50 years, America is indeed cursed by race. Would he call the president a liar, like Joe Wilson, Representative from South Carolina, who has reserved his place in history as the first congressman to accuse a president of lying to his face? Did the president’s race have anything to do with such a sorry departure from Southern manners?

Having an African-American president has made America more intolerant, not less, as he has become the lightning rod for deep-seated racial prejudice. Frustrated that the democratic process, or what some call “the tyranny of the majority,” has returned a black man to the White House, many conservatives have resorted to dog-whistle jibes, sneaky remarks that are well understood by those who know what to listen for but which allow the perpetrator to walk the fine line of deniability.

Take Rick Santorum, who as a lawyer is precise with his words. When he told an audience “America was great before 1965,” was he signaling that the U.S. was a better place before the Beatles invasion, or before the 1965 civil rights march, led by Martin Luther King, Jr. through Selma, Alabama, that ushered in LBJ’s Voting Rights Act? Despite accusations of racism, Santorum declined to explain his remark.

In the Republican primaries, when Juan Williams, a rare African-American face on Fox, asked Newt Gingrich whether using phrases like “entitlement society,” “lack of work ethic,” and “food stamp president” was a none-too-subtle appeal to racists, the South Carolina Republicans hissed and booed the questioner. Gingrich may pick his words carefully, but such a visceral reaction tells its own savage story.

When Arizona’s governor, Jan Brewer, wagged her finger at the president in front of the cameras before saying she “felt a little threatened, if you will, in the attitude that he had,” was she letting her white voters read between the lines? The appeasers say: You are being too sensitive. It’s all in the eye of the beholder. We simply don’t get it. It is hard to know whether they are so wrapped up in their self-centered individualist philosophy or simply being disingenuous.

Is the notion of dog-whistle racism trumped up by liberals? Not according to Lee Atwater, the dirty-tricks merchant for Reagan and George H.W. Bush. “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 ‘forced bussing,’ ‘states’ rights,’” he confessed, on the assumption, naturally, he would not be quoted. “Now you talk about cutting taxes, and these things you’re talking about are totally economic things, and a byproduct of them is, blacks get hurt worse than whites.”

What relevance does all this talk about race have to America’s future? It means almost certainly we will not have a Republican president until and unless the GOP purges itself and makes racial bigotry and intolerance unacceptable in its ranks. As the number of non-white voters increases by the day and the GOP retreats into its redoubt for angry old white men, the next Republican victory slips further away.

At present, the party is a safe haven for racists, who gerrymander constituency borders to award more power to white constituencies than black or Hispanic, and make it difficult for racial minorities to vote, all in the name of nonexistent voter fraud. Republican strategists candidly admit countering “voter fraud” is really to stop minorities from voting.

Republicans like Jeff Flake are taking a risk promoting immigration reform in the face of racists among his party’s grass roots. The GOP will lose whether or not the law passes. Not many of the 11 million new voters will thank Republicans, who have implacably stood in the way of their becoming citizens, while Democrats have mostly welcomed them. If reform fails it will only confirm to Hispanics that the GOP does not have their best interests at heart.

Senator Lindsey Graham, hardly a hothead, is pessimistic about the party of Lincoln’s future chances. “If we don’t pass immigration reform, if we don’t get it off the table in a reasonable, practical way, it doesn’t matter who you run in 2016,” he said. “We’re in a demographic death spiral as a party.”

If moderate conservatives want to save their party, they would stop being in denial about the haters in their midst and call out racists for what they are. As Cardinal Spellman said about ignoring the threat of Nazism, “We really cannot any longer afford to be moles who cannot see, or ostriches who will not see.”

Nicholas Wapshott is the author of Keynes Hayek: The Clash That Defined Modern Economics. Read extracts here.

PHOTO: A message is displayed on the face of Keesha Clark during a march to protest the verdict in the George Zimmerman trial, in Los Angeles July 20, 2013. REUTERS/David McNew