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What exactly is the "nuclear option"?

The term "nuclear option" refers to the attempt by Republicans to undermine the filibuster, a device by which a parliamentary minority can hold up the business of the majority indefinitely.

Oh...why is this considered so crazy that it's called "nuclear"?

In the US political system, anything that creates nonzero levels of disagreement between the major parties is considered crazy.

How did the Republicans devise such a devious scheme?

They cribbed it from the Democrats.

So the "nuclear option" would eliminate the filibuster entirely?

No, not really. Since neither party really represents the will of the majority, the current ruling party more or less banks on losing control within the next few electoral cycles, once people have had enough time to a) discover that they're a bunch of jerks and b) forget that the opposition party is also a bunch of jerks. So the filibuster is in both parties' interests. The Republicans are merely threatening to set a precedent under which it cannot be used for judicial confirmations. Maybe it should be called the "bunker buster option."

Why are the Republicans so especially concerned about judicial nominations?

Judicial posts are both political nominations and permanent. What this means is that a party can offer a pretty cushy, tenured job to someone with complete indifference as to qualifications (or, more precisely, lack thereof). A federal judgeship is the ideal reward for a political crony who is loyal, yet too stupid or crude to even be a consultant. Obviously the satiation of such individuals is of the highest importance in modern politics.

Jesse Jackson has stated that the "nuclear option" threatens "our entire way of life." Is this true?

It depends. For an immense, nearly unanimous majority of Americans: fucking of course it isn't true. There is a tiny clique for whom these developments are quite decisive, but our demographic studies indicate that this group is fully disjoint with the set of Reverse Vote Swappers, so we can safely neglect to consider them.