I want to defend those people who say “live the gospel” and use it in an orthodox, God-honoring way. When many say “live the gospel” they effectively mean, as Al Martin said in the sermon “A life that embodies the transforming power of the gospel”. They don’t mean “Live [because your life is] the gospel” (which would be wrong), they just mean “Live [in light of] the gospel” or “Live [out] the gospel” or “Live [by] the gospel” or “Live [a life marked by] the gospel”. Would that we would all seek our lives to be characterized by that!
If that's what they mean, then that's what they should say. The Gospel is the message and declaration of the forgiveness of sins because of the death and resurrection of Jesus of Nazareth. Instead of using language that might obfuscate the issue, we should insist on language that is clear.
Many times what people mean by "Live the Gospel" is what St. Francis of Assisi said, "Preach the Gospel always, and use words when necessary." However this is the reverse of what it should be. "Preach the Gospel always, and use actions when necessary" is really how it should be.
In his excellent book Gospel-Centered Hermeneutics, Graeme Goldsworthy makes the following assertion (p. 59):
It cannot be stressed too much that to confuse the gospel with certain important things that go hand in hand with it is to invite theological, hermeneutical and spiritual confusion. Such ingredients of preaching and teaching that we might want to link with the gospel would include the need for the gospel (sin and judgment), the means of receiving the benefits of the gospel (faith and repentance), the results or fruit of the gospel (regeneration, conversion, sanctification, glorification) and the results of rejectingit (wrath, judgment, hell). These, however we define and proclaim them, are not in themselves the gospel. If something is not what God did in and through the historical Jesus tow thousand years ago, it is not the gospel. Thus Christians cannot 'live the gospel' as they are often exhorted to do. They can only believe it, proclaim it and seek to live consistently with it. Only Jesus lived (and died) the gospel. It is a once-for-all finished and perfect event done for us by another.
I can’t live the Gospel. Thank God my life is not the Gospel. My life is not the Good News. Obviously that isn’t an excuse for an ungodly life. If we insist on pointing to our lives as a model for the Gospel we end up having the greatest story never told. We must let the Gospel and it's necessary implication and consequences continually transform our lives to be more like His. The phrase "live the Gospel" however implies something far different then that, despite what well meaning teachers may define the term as. I'm for clarity, not obfuscation.