It is the worse insult you could possibly say to someone.
Possiably so bad the affended person has the instant right to commit murdeur to the name caller.
"your a cracker with butter"
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Crackers on butter is an idiom used to describe that doesn't make sense, or seems "backwards"
"Well, that's just crackers on butter!"
Snot, especially really thick nasty stuff when your sick. Sometimes this also applies to 'loogies' or 'hockers'.
Oh boy, look at all that cracker butter after I blew my nose.