Baseless accusations of extreme positions have the effect of making those positions seem more palatable. For example, when Rush Limbaugh and his ilk call everyone they don't like a socialist, it desensitizes people to the ideology. Liberals keep getting called socialists, and it makes socialism seem a lot more palatable to the average person, emboldening actual socialists and legitimizing them in the eyes of society. Similarly when SRS types accuse anyone vaguely critical of the far left of being a racist or sexist, it turns these positions from the fringe to the mainstream. Moderate conservatives and libertarians are constantly being baselessly attacked as being racist or sexist, what are they going to think? OK, so wanting tax reform makes me a racist, then I guess I'm a racist. This again breaks down sensitivities, and makes non imaginary instances of racism and sexism seem less abhorrent.
I think that the use of hyperbole in politics ultimately undermines your own side and radicalizes/emboldens groups which you oppose