In the U.S., the First Amendment prohibits the government from abridging freedom of speech. Of course, there are some exceptions, such as obscenity and the classic example of falsely shouting "fire!" in a crowded theater. Another exception is known as "fighting words."
The most important Supreme Court case regarding "fighting words" is Chaplinsky v. New Hampshire. Mr. Chaplinsky was a Jehovah's Witness, but for obvious reasons laid out below, this case is not mentioned in the Proclaimers book.
Brother Chaplinsky was street witnessing one Saturday afternoon in Rochester New Hampshire in 1940. Apparently a mob of 50 or so people surrounded him and behaved in a threatening manner.
According to Chaplinsky, one member of the crowd even attempted to spear him with a flagpole. At some point, a police officer showed up, and Chaplinsky asked the cop to arrest the ones responsible for the disturbance, but the cop refused. In response, Chaplinsky allegedly called the officer "a God-damned racketeer" and "a damned Fascist."
Chaplinsky was subsequently arrested, tried, and convicted for violating a state law against public cursing. Chaplinsky appealed the decision all the way to the U.S. Supreme Court. "Judge" Rutherford and Hayden Covington represented him. At trial, Brother Chaplinsky admitted making the statements with the exception of saying "God-damn" (he argued that he merely said "damn").
In any event, in their brief to the Supreme Court, Rutherford and Covington defend Chaplinsky's right to say "God-damn." I quote from page 11 of the brief: "Jehovah God has condemned racketeers and hence the expression 'God damned,' even if, as and when used in such circumstances, imports verity or constitutes a simple definition of fact. The right to use such definitive and descriptive language in a proper manner and time is guaranteed by the Constitution regardless of whether the one so described agreed or not." Thus, Judge Rutherford is on the record saying that it's okay to say "God damn."
By the way, Chaplinsky lost his appeal. I guess that during WW2, calling someone a Fascist and racketeer was fighting words, whether prefaced with "God damn" or not. Chaplinsky, Rutherford and the others were not bothered by the loss in Court, because now they could proclaim far and wide about how Jehovah's Witnesses were persecuted.
You can read the entire case here: http://supreme.justia.com/us/315/568/case.html