Today I was reading Dennis Ngien's Theology of Preaching in Martin Luther (Themelios 28/2 pp28-48). He referenced Martin Luther's comments on Galatians 5:8 from his commentary. It sent me back to Luther to find this gem.
The devil is a cunning persuader. He knows how to enlarge the smallest sin into a mountain until we think we have committed the worst crime ever committed on earth. Such stricken consciences must be comforted and set straight as Paul corrected the Galatians by showing them that their opinion is not of Christ because it runs counter to the Gospel, which describes Christ as a meek and merciful Savior.
Satan will circumvent the Gospel and explain Christ in this his diabolic way: "Indeed Christ is meek, gentle and merciful, but only to those who are holy and righteous. If you are a sinner you stand no chance. Did not Christ say that unbelievers are already damned? And did not Christ perform many good deeds, and suffer many evils patiently, bidding us to follow His example? You do not mean to say that your life is in accord with Christ's precepts or example? You are a sinner. You are no good at all."
Satan is to be answered in this way: The Scriptures present Christ in a twofold aspect. First, as a gift. "He of God is made unto us wisdom, and righteousness, and sanctification and redemption." (1 Cor. 1:30.) Hence my many and grievous sins are nullified if I believe in Him. Secondly, the Scriptures present Christ for our example. As an exemplar He is to be placed before me only at certain times. In times of joy and gladness that I may have Him as mirror to reflect upon my shortcomings. But in the day of trouble I will have Christ only as a gift. I will not listen to anything else, except that Christ died for my sins.
To those that are cast down on account of their sins Christ must be introduced as a Savior and Gift, and not as an example. But to sinners who live in a false assurance, Christ must be introduced as an example. The hard sayings of Scripture and the awful judgments of God upon sin must be impressed upon them. Defy Satan in times of despair. Say: "O cursed Satan, you choose a nice time to talk to me about doing and working when you know very well that I am in trouble over my sins. I will not listen to you. I will listen to Christ, who says that He came into the world to save sinners. This is the true Christ and there is none other. I can find plenty of examples for a holy life in Abraham, Isaiah, John the Baptist, Paul, and other saints. But they cannot forgive my sins. They cannot save me. They cannot procure for me everlasting life. Therefore I will not have you for my teacher, O Satan." (Martin Luther Commentary on The Epistle to the Galatians Translated by Theodore Graebner. pp. 184-185)
Ngien quotes Luther (LW 27, 35):
"To those who are afraid and have already been terrified by the burden of their sins, Christ the saviour and the gift should be announced, not Christ the example and the lawgiver. But to those who are smug and stubborn the example of Christ should be set forth, lest they use the gospel as a pretext for the freedom of the flesh, and thus become smug."
The pastor must skillfully navigate this balance. We can set Christ forward so much as example that we undermine the gracious gift. We can create Christians who either (a) become so burdened by the example all real hope is cast aside because they and their consciences know they do not live up to the example; or (b) who become so absorbed in their performance they loose site of Christ as the gift and basis for the fruit of obedience that they genuinely begin to think they are doing the merit of following Jesus--as if God loves them for their abilities.
On the other hand, grace is not license. The Christians who's heart is transformed by God's grace can be properly motivated by the example that Christ serves in humility and self-giving sacrificial love. Christ as example can serve the Christian as motivation but also the smug Christian can be reminded by Christ's example of how far we really do fall short.