In "The Devil and Tom Walker", why does the Devil say that Deacon Peabody is damned?
The Devil ("Old Scratch") says that Deacon Peabody is damned, "or will be", if he doesn't look after his own sins instead of the sins of others.
A deacon is a title of somewhat ambiguous placement and authority, but it generally implies a member of the clergy (church authority) with fairly pedestrian duties, such as maintenance of church idols or the recitation of prayers. Thus, the hypocrisy implied here is that Peabody, being a low-ranking member of the church, nevertheless sees himself as a high moral authority, when in fact he has considerable problems of his own that he should be resolving before seeking out ways to correct others. This is perhaps a reference to a Bible passage that cautions against hypocrisy, telling believers "before you start trying to help people get specks of dirt out of their eyes, make sure you don't have a log in your own eye".
This point is further illustrated by the internally rotting tree that represents the deacon, suggesting that he is fundamentally flawed despite a healthy exterior.