he first coined the phrase when he intended to call someone a douchebag and a faggot at the same time but due to a lapse of intellegence(happens every five minutes) he accidently said douchebaggots
a douchebaggot is on fact someone being a raging "shithead"
EVERYONE ELSE: did you just say douchebaggots, your such a fucking dumbass JT
John: This guy's such a loser!
Ted: I know, what a douchebaggot!