Does not 1 John 1:8 say that if we have no sin we deceive ourselves?
Answer: Well, what is helpful in understanding 1 John 1:8 is looking at it's immediate context. 1 John 1:10 says if we say we have not sinned. 1 John 1:10 moves verse 8 (which is present tense) into a past declaration (with verse 10). Verse 10 is saying there are people who said they have not sinned (past tense). This is clearly a gnostic belief. Most believers today hold to the idea that they have sinned at some point in their life (Regardless of whether they are an OSAS believer or a Conditional Salvationist). 1 John 1:8 is a present declaration of sin. It is saying if we say we have no sin when we do sin (present tense). This has to be the interpretative understanding of this verse because 1 John 2:4 says if we say we know Him and do not keep His commandments we are a liar and the truth is not in us. The OSAS's interpretation on 1 John 1:8 does not work because it conflicts with a normal reading on 1 John 2:3-4. You cannot always be in sin (breaking God's commands) as a part of 1 John 1:8 and yet also fulfill 1 John 2:3 that says we can have an assurance of knowing Him if we keep His commandments. Especially when 1 John 2:4 says we are a liar and the truth is not in us if we break his commandments. In other words, if the OSAS interpretation on 1 John 1:8 was true, then I would be damned if I do by obeying God's commands (1 John 1:8) and yet I would be damned if I don't by not obeying God's commands (1 John 2:4).
In fact, the New English Translation says this for 1 John 1:8,
"If we say we do not bear the guilt of sin, we are deceiving ourselves and the truth is not in us."
(1 John 1:8 NET).
In other words, this verse is saying that if a person sins and says they do not bear the guilt of sin (in the sense that they will not have to face any wrath or Judgment from God over their sin) then they would be deceiving themselves and the truth would not be in them. This is exactly what the Eternal Security proposes. They are saying that they do not bear the guilt of any sin (destruction of their soul and body in hell fire) if they do sin because they believe their sins are paid for: Past, present, and future by Jesus. They are saying, they do not bear the guilt or the punishment of sin at the final Judgment because of their belief on Jesus. In short, 1 John 1:8 is a denial of the existence of sin on some level. “If we say we have no sin (in the sense that it does not exist) we deceive ourselves and the truth is not in us.” (1 John 1:8). Christian Scientists think sin is an illusion and does not exist at all. So this verse would apply to them. Eternal Security Proponents and those who deny that “Sin Can Separate a Believer from God” deny the existence of sin partially. They believe sin exists physically but they do not believe sin exists for them on a spiritual level because Jesus paid for it all by their belief on Jesus. In fact, to see just how silly your argument actually is for 1 John 1:8, you would have to believe that you are sinning right now at this very moment in order for such a verse to be true because 1 John 1:8 is speaking in the present tense.
If you were to re-read James chapter 2 and pay a little more attention to what it says, James is saying this not as means of how nobody can keep the whole law, but he is saying this as a means of condemnation in not loving the brethren. The chapter begins with certain believers having respect of persons. They favor the rich or financially well brethren, but they do not show favor towards the poor brethren. They are breaking the "Royal Law." For James calls it this. The Royal Law is loving your neighbor. James defines it this way. Then James talks about how if you break this law, you are guilty of breaking all of God's good laws. Then James continues to drive his point home about not having respect of persons by saying that faith without works is dead. Meaning, a person cannot just have a belief on Jesus and have no love in their actions towards others. James is saying that kind of faith is a dead kind of faith. In fact, the eternal moral law is kept by loving your neighbor (See Romans 13:8-1
Romans chapter 4
13 It was not through the law that Abraham and his offspring received the promise that he would be heir of the world, but through the righteousness that comes by faith. 14 For if those who depend on the law are heirs, faith means nothing and the promise is worthless, 15 because the law brings wrath. And where there is no law there is no transgression.