I recently asked a theist who was asserting the moral argument on a blog an alternate version of the Euthyphro dilemma. I asked him, "Is God good because he is loving, compassionate and fair, or is being loving, compassionate and fair good because God is good?" And he responded saying:
Being loving, compassionate and fair is good because God is loving, compassionate and fair. It is because God is that way that these qualities count as virtues in the first place. Essentially, God is good the same way water is wet, diamonds are hard and stars are blazing hot. So if we think of God’s goodness in terms of His possessing certain virtues rather than fulfilling certain duties, we have a more exalted and more adequate concept of God.
Interestingly, earlier this same theist said that god "is essentially loving, just, kind. etc." Do you notice a circular argument here? According to this theist, being loving compassionate and fair is good because god is loving compassionate and fair, and god is good because he is loving compassionate and fair. The problem the theist faces here is obvious, although some theists obviously still don't get it. To say something is good because god has those qualities, and god is good because he has those qualities is a circular argument; the theist has failed to explain why those qualities are good, or why god is good for that matter. Nothing can simply just be good without a reason, there must be a reason why something is good or bad. The theist who is aware of this often will just assert that god is good, and will be forced to make a circular argument in doing so. To avoid circularity, they must justify virtues like love, compassion, and fairness by showing their positive intentions and effects. And in doing so, they will show that that the goodness of these virtues are independent of god. But that's exactly what they must avoid in order to hold to the notion that god is the source of all goodness.
And by saying, "It is because God is that way that these qualities count as virtues in the first place," is just a bold face assertion. It doesn't demonstrate that “good” or "virtue" cannot exist independently of god. Even if goodness is an essential property of god, it is a property that can apply to other things independently of god’s existence. Just think of how being hot is an essential property of fire – fire must be hot, it cannot be cold. But “hot” can apply to many other things independently of fire. For example, microwaves cause things to be hot and so does friction. The Euthyphro dilemma stands as a defeater to anyone defending the position that god is the source of goodness or morality.