What were the Jews like spiritually at the time of Christ's birth?
At the time of Christ's birth, the nation of Israel was under the law, not grace. Spiritually, they saw nothing but their own self-righteousness and bragged that they were law-keepers. The Pharisees especially boasted of keeping the law impeccably. Jesus never told them to stop keeping the law, because Israel was not yet ready for the law to be set aside.
Les explains that the law was the system under which Christ came. He points out that Jesus never once told the Jews of His day to forget keeping the law or that they were under grace. He could not say that, because Israel was not yet in a place where the law could be set away. That could not happen until He died, and Les says the cross is where the law was finally crucified. So at the time of Christ's birth, Israel was under the law, seeing nothing but their own self-righteousness, bragging about being law-keepers, and the Pharisees bragged of how impeccably they had kept the law.