I'm not sure if the author coined the term or not, but I read an interesting article by Denver Bishop http://www.firstthings.com/onthesquare/2011/07/americarsquos-atheocracy
But as we celebrate this Fourth of July, we need to recognize that some of the deepest problems in our public life can be traced to our collective neglect of America’s great founding document.
The Declaration establishes our common self-identity as Americans. It tells us that we are one nation under God, a people who believe that all men and women have God-given rights. It tells us that government exists for no other purpose than to defend and promote these rights. All this we find in the Declaration’s preamble, which still has the power to stir us.
America’s founders never intended to establish a religious government, let alone a theocracy. In fact, just the opposite. They specifically disallowed any state-sanctioned religion. Yet the government they did establish was founded on theistic, if not explicitly Christian, principles.
America today is becoming what I call an atheocracy—a society that is actively hostile to religious faith and religious believers.
Our atheocracy has rejected what Chesterton called the dogmatic basis of American identity and liberties. An atheocracy has no ultimate truths to guide it and no inviolable ethical principles by which to direct political activity. Hence, it has no foundation upon which to establish justice, secure true freedom or to constrain tyrants.
We see the consequences of this atheocratic mindset everywhere. We see it most clearly in the case of legalized abortion. Denying the divine origins of the human person, our government has withdrawn the law’s protection from unborn children in the womb—the most absolutely innocent and defenseless members of our human family.
The legal extermination of the unborn is only the most egregious offense against God’s law. In fact, there is apparently no area of life over which our atheocratic government does not feel omni-competent—that government knows best.
Given my previous post on the political side of Christianity (http://bibleimmersion.blogspot.com/2011/06/is-jesus-kingdom-political.html), I would argue that most people today wouldn't even recognize a biblical theocracy, because I'm not sure the biblical authors, let alone most of non-modern Western world, would understand the "neat" categories of sacred/personal/civil etc. Now don't get me wrong. I think quite often it's useful to make these distinctions, but we shouldn't think of them of strict lines in the sand. The relationship between them all is blurry and messy when it comes around to concretely applying these abstract principles.
The main goal of Jesus' parables in the Gospels was to redefine what kingdom means as paradoxically through the cross he became king and has been given "all authority in heaven and on earth." I'm going to stick my neck out, but I think that saying, "Well, no Jesus. You rule in heaven, sure, but on earth only in people's hearts" is dangerously close to Gnosticism.