This is how God reveals Himself to Moses. It is a foundational text, quoted and alluded to repeatedly throughout the Bible. There is a lot you could say about it, but I want to focus on one aspect: it tells us something crucial about how we talk about God.
First, keep in mind that when you see "Lord" in those verses, that is Yahweh, the name God gives to Himself. While He uses it as a divine name, it is also a word in Hebrew, a word translated "I Am" or "I Will Be." This matters because, in passages like this one, it gives a specific twist to the language. God is stating "I am..." and then ascribing these descriptions, these attributes to Himself. So mercy and grace (and also justice, not clearing the guilty) aren't just ideas about some part of God; He is claiming that He is them. He embodies them.
To see why this matters, let's name the thing about this verse that makes us uncomfortable. We all like the first part of it, and rightly so. It is a beautiful thought that God, in the moment of His appearing, would declare steadfast love and forgiveness as the essence of who He is. Yet we often pause uncomfortably before the last bit of verse 7. Not clearing the guilty? Visiting iniquity of the fathers on the children?
Obviously some of that comes from a general discomfort with the idea of divine justice. It makes us uncomfortable, it sounds judgey (because, you know, in a proper sense it is), and it's hard to fit on a bumper sticker or inspirational Facebook meme. While that discussion about divine justice matters, we should save it for another post.
What I want to focus on is the second reason we struggle with how that passage ends - we don't get how it fits together. We have some sense that the first set of attributes, mercy and grace and love and faithfulness, might all in a sense be synonymous, or at least so closely related as to be saying roughly the same thing. We come to the last part, though, and we feel like there is some contradiction there. "Forgiving iniquity and transgression and sin, but who will by no means clear the guilty."
This tension confronts us in other ways as well. "God is love," 1 John 4:8 tells us. People often quote that, and even more reason from it to other ideas. "God is love," therefore He must do what I want. Therefore we must file off His rough edges. After all, that is an absolute statement. It's not just saying that God loves sometimes - it's saying that God is love.
The problem is, this isn't the only absolute statement you find in Scripture. “God is holy,” says the Psalmist (Psalm 99:9). “God is just,” says Paul (2 Thessalonians 1:6). “God is a consuming fire, a jealous God,” says Moses. (Deuteronomy 4:24) All of these statements are given as equally full and definite. God is all of these things. Which of course hearkens back to this language from Exodus. "I AM a God gracious and merciful..."
What do we do with this tension? How do we resolve these ideas of God as love and holy and just and a jealous fire?
Our tendency is to "resolve" them by pitting them against each other. It's there in the simplistic way some Christians explain the gospel - "Because God was just, He couldn't ignore our sin, even though in love He really wanted to. So in order to keep the just part of Himself happy, God sent Jesus to die." Which isn't exactly wrong - there is a sense in which both divine love and divine justice are expressed in Jesus - but is incredibly misleading.
What we end up portraying is a conflicted God. A mirror, perhaps, for our own conflicted hearts. This causes two problems. One, it makes God less than the God of Scripture - this torn, hand-wringing being is hardly the perfect, glorious One who demands our praise. And two, we tend to inevitably take one side or the other. Ultimately, we feel, God must be either loving or just, either gracious or holy. Which leads us to implicitly deny that the other is the case.
The error in all of this lies with the original assumption - that there is a tension within God.
What is striking about Exodus 34 is that there is no hesitation on God's part before the last part of verse 7. Rather, if reads more like clarification. God starts by declaring His love - then, concerned it might be misunderstood, He makes clear that this love doesn't negate justice. The two are not contradictions or tensions - they are simply both expressions of who God is.
When we talk about God's attributes, we aren't talking about pieces of God. God isn't a committee of attributes, with mercy and grace bickering with justice and wrath until love breaks in to break the tie or something. God is perfectly Himself. He is fully each of those things - mercy and grace and justice and wrath and love.
Those words aren't ideas that have power over God. He does not think to Himself, "Oops, I'm not being very loving. Better work on that. Oh, now I'm veering to far away from justice. Time for a bit more fire and brimstone." God is God, and love is then a way we as human beings describe Him. It is really true of Him - He is really loving - but not because love defines Him but because He defines love.
All of which should remind us of two things.
First, we need to always be seeking to take God on His terms. He comes to us as He is, and it is the worst sort of sin to then seek to remake Him as we want Him to be. Indeed, when speaking about Him, we must alter our definitions of the words we use to accurately reflect it. If love means that God cannot be holy, it is our definition of love - not God's holiness - that must change. If our definition of justice doesn't allow God to be merciful, it is our definition of justice - not God's mercy - that must be reexamined.
Second, we need to be careful when we speak about God at all. Not that we shouldn't speak - we absolutely should. But all of the above is a stern warning against our own idolatry. Humans since the beginning have been in the habit of redefining God to make Him fit our own ideas. "Did God really say...?" asked the Serpent, and from that point on we have been tempted to make Him fit our preferences.
God is beyond our comprehension. He is perfect Being, and our words are only crude gestures at describing Him. Yet He is also who and what He Is. So we should never act like we've got Him figured out. Instead, we should be constantly seeking to let ourselves be challenged by Him.
This is the test we should apply to our hearts. When we are reading Scripture, our question shouldn't be "how does this prove we are right," but rather "how does this show us we are wrong?" When we think about God, we should be asking, "Does this make me unsettled? Does this transcend my comprehension?" If there isn't a sense in which it does, we should be very worried. Being comfortable with God, having Him all figured out - those are good signs we are worshipping not the God who Is but a god of our own invention.