Waitresses still call their customers "Hon" around her,Q(Central and Western Maryland up into Pennsylvania.

To expand on Q's point, it is important to understand that Berlin, as well as Ira Gershwin, Larry Hart, Cole Porter, and all the other Jazz age lyricists tried to capture the speech of ordinary people in their lyrics. This was a very different thing from 19th century lyricists who tended to write in a poetic language that was formal, heavily Latinate, and often turned on word and grammatical usage that was rarely used in spoken English.

As Gibb Sahib pointed out, congenial insults, backhanded compliments, ironic comments and smart remarks are pretty much a staple of American conversation, and not just on the sidewalks of New York.