How do Roman Catholics understand salvation in light of Romans 3&4?

I see no contradiction.

Through the Grace of God we learn of God, and receive faith in God. This faith is our path to salvation.

When one is blessed with faith, one seeks to live according to that faith. Living according to the faith is what we refer to as "works." Salvation is not earned by living a good life; it is given to us by God, is forfeited through sin, and given back to us through redemption and forgiveness.

God tells us what it means for us to live according to our faith. For some it means a consecrated life as a priest, monk or nun. For some it means charitable works. For some it means other kinds of ministry. For some it means "standard" family and community life. And so on ...

Temptation abounds, and when we stray we seek forgiveness and seek to return to life according to the faith.

One note: Catholics (and most other Christians??) believe that Scripture is internally consistent. Any apparent inconsistency is because we do not fully understand, not because the Scripture is inconsistent or incorrect. Individual verses or passages, while often powerful and illustrative, don't stand alone.

There is no difficulty for Catholics. We see no conflict between our faith and Romans 3 & 4 when we read it. Our understanding of the two chapters is as follows:

Chapter 3 starts with a continuation of the argument about circumcision begun at 2:25. Paul's argument culminates with the conclusion at verses 19-20 translated by the Jerusalem Bible as follows:

19 Now we are well aware that whatever the Law says is said for those who are subject to the Law, so that every mouth may be silenced, and the whole world brought under the judgement of God. 20 So then, no human being can be found upright at the tribunal of God by keeping the Law; all that the Law does is to tell us what is sinful.

No arguments from Catholics in this regard.

The question specifically asks about verses 21-22:

21 God's saving justice was witnessed by the Law and the Prophets, but now it has been revealed altogether apart from law: 22 God's saving justice given through faith in Jesus Christ to all who believe.

Catholics have no problem at all with this sentence. It is foundational to our faith that the justice of God comes to us through our faith in the merits of Jesus Christ, specifically earned on the cross. The law could only reveal God's justice, it could not empower us to live it in any way. The thought is further clarified in the rest of the paragraph:

23 No distinction is made: all have sinned and lack God's glory, 24 and all are justified by the free gift of his grace through being set free in Christ Jesus. 25 God appointed him as a sacrifice for reconciliation, through faith, by the shedding of his blood, and so showed his justness; first for the past, when sins went unpunished because he held his hand; 26 and now again for the present age, to show how he is just and justifies everyone who has faith in Jesus.

The next verse inquired of is 3:28, which is not a complete sentence in the Jerusalem Bible. Starting at verse 27 then:

27 So what becomes of our boasts? There is no room for them. On what principle- that only actions count? No; that faith is what counts, 28 since, as we see it, a person is justified by faith and not by doing what the Law tells him to do.

Note that Paul here is not dismissing all actions. The context is the works of the Jewish law versus faith. Catholics insist that we who are not of the circumcision are not bound by the Jewish law. Furthermore, the gospel makes available salvation by faith even to those of the circumcision since it is impossible to live in righteousness by the law, because the law provides no grace for keeping it. We are saved by faith, just as Paul teaches here. We take our theology directly from these very verses.

However, note that Paul does not say "faith alone", but rather "faith". Catholics understand faith to be a lifestyle, not a decision, not merely a once-and-for-all-times assent to abstract truths. The only Biblical citation to "faith alone" is James 2:17 where it is condemned: "Even so faith, if it hath not works, is dead, being alone." (KJV) Living faith, then, must result in good works just as apple trees result in apples. It's not the good works that save, but the merits of Christ. Nevertheless, the good works must follow if you are to have any personal assurance of salvation.

The question also specifically asks about verses 4:4-6. I prefer to treat the entire paragraph as a unit, but I will bold 4-6:

1 Then what do we say about Abraham, the ancestor from whom we are descended physically? 2 If Abraham had been justified because of what he had done, then he would have had something to boast about. But not before God: 3 does not scripture say: Abraham put his faith in God and this was reckoned to him as uprightness? 4 Now, when someone works, the wages for this are not considered as a favour but as due; 5 however, when someone, without working, puts faith in the one who justifies the godless, it is this faith that is reckoned as uprightness. 6 David, too, says the same: he calls someone blessed if God attributes uprightness to that person, apart from any action undertaken: 7 How blessed are those whose offence is forgiven, whose sin is blotted out. 8 How blessed are those to whom the Lord imputes no guilt.

Now a quick review of the life of Abraham reveals that he had many actions which proved his faith in God. His was a living faith. He packed up all his belongings and left his homeland not knowing where he was going. He circumcised himself and all his household as an old man. He believed God unswervingly for years first for a son, and then a son to be the father of many nations. He proved himself ready to sacrifice his son Isaac as a holocaust, knowing that it was Isaac that was to produce the many nations. Hebrews chapter 11 goes into Abraham's faith in detail.

Yet for Catholics, all good works come as a result of grace, specifically sanctifying grace, so no wages are ever due for them. All is grace (favour in the above citation.) A Catholic would say that Abraham received much grace in order to believe as powerfully as he did. Works are the proper fruits of righteousness (uprightness in the above citation); they are never the reason why God imputes righteousness.

Coming back to the concept of assurance of salvation, verse 11 says in part "circumcision was given to him [Abraham] later, as a sign and a guarantee that the faith which he had while still uncircumcised was reckoned to him as uprightness." Thus, we see in action the Catholic doctrine that good works, while not in themselves salvific, do give us assurance that our faith is operative, and therefore we can have assurance of our salvation.

In verse 16 Paul makes the point about faith coming by grace (free gift):

16 That is why the promise is to faith, so that it comes as a free gift and is secure for all the descendants, not only those who rely on the Law but all those others who rely on the faith of Abraham, the ancestor of us all

The chapter ends at verse 25 with the statement:

we believe in him who raised from the dead our Lord Jesus who was handed over to death for our sins and raised to life for our justification.

Again, no arguments from Catholics. We believe every word of it.

You might want to have the New American Bible sourced, that's our defacto bible, although it's not always as flowery and scholars don't really use it, it contains what we believe. It could give you a concise answer without me elaborating.

But now the righteousness of God has been manifested apart from the law, though testified to by the law and the prophets, the righteousness of God through faith in Jesus Christ for all who believe. For there is no distinction; all have sinned and are deprived of the glory of God.

(Romans 3:21-22 - NABRE)

For we consider that a person is justified by faith apart from works of the law.

(Romans 3:28 - NABRE)

A worker’s wage is credited not as a gift, but as something due. But when one does not work, yet believes in the one who justifies the ungodly, his faith is credited as righteousness. So also David declares the blessedness of the person to whom God credits righteousness apart from works:

(Romans 4:4-6 - NABRE)

The people Paul was admonishing were those who those who felt justified by works of the law, he's echoing Jesus's lament about the Pharisees who felt that washing their hands was more important than taking care of their parents.

I believe there is a distinction, and correct me if I'm wrong, but Protestant bibles don't mention works of the law just works right? I think that's one of the fundamental differences between our confessions.

I should preface this answer by pointing out that Catholics and non-Catholic Christians may not mean the same thing at all when they each say the word "faith". When a Catholic says "faith" in a context like this, he means free assent to the whole truth that God has revealed (CCC 150). This is not a complete definition of faith but it's an essential part. I'm not sure that it coincides with a typical non-Catholic understanding of the fides in sola fides.

At any rate the other answers so far are helpful in distinguishing between faith and works generally, but it sounds like the original question is focused more on the distinction between faith and grace.

Your question seems to hinge on one particular aspect of Catholic doctrine:

God gives us grace to perform the meritorious works that earn our salvation.

Strictly speaking this is an accurate statement from the Catholic viewpoint; cf. for example the Catholic Catechism on "Merit" (emphasis in original):

Moved by the Holy Spirit and by charity, we can then merit for ourselves and for others the graces needed for our sanctification, for the increase of grace and charity, and for the attainment of eternal life

But this is is a difficult and somewhat mysterious concept, because anyone who is able to perform "meritorious works" of this sort is by definition already justified (in more typically Catholic language, is already in a state of sanctifying grace).

Or, to put it more succinctly: only the just are able to perform meritorious works. So in one sense there is no question of earning one's salvation by meritorious works.

On the other hand the Church teaches very clearly, as quoted above, that the just can "merit ... the attainment of eternal life". What this means precisely (to the extent that it can be understood at all) might best be explored in a separate question.

And all of that still leaves the question "how is one justified?" (Catholic translation: how does one attain a state of sanctifying grace?). The simple, externally visible answer in the normal course of most people's lives is "by being baptized".

But that's not a complete answer by any means, because the Church teaches that there is a lot going on within the believer prior to baptism, and that after baptism one could in fact lose one's justification (Catholic translation: sin mortally) and would then need to be justified again (be restored to sanctifying grace), which God normally achieves in the context of sacramental confession.

In any event, the supernatural virtue of faith, which is a gift from God, is foundational to the process of justification, but in typically careful fashion the Church notes that faith is a virtue of the intellect, whereas the will must also be prepared for justification. From the Catholic Encyclopedia entry on "Sanctifying Grace":

The Council of Trent (Sess. VI, can. ix) decrees that over and above the faith which formally dwells in the intellect, other acts of predisposition, arising from the will, such as fear, hope, love, contrition, and good resolution (loc. cit., cap. vi), are necessary for the reception of the grace of justification.

How then do we read Romans 3 & 4? I'm not sure if there's an official Catholic answer to that, but it does seem that any interpretation must also be compatible with, on the one hand, the 'work' of Philippians 2:12 and the 'crown ... which the Lord ... will award' of 2 Timothy 4:7-8 -- not to mention the necessity of baptism* as expressed in John 3:5.

*Bearing in mind that besides sacramental baptism there is also the baptism of blood and the baptism of desire

Essentially it boils down to that we are saved by grace alone, but that salvation results in such a change of heart that good works must result.

From the Joint Declaration on the Doctrine of Salvation (all emphasis mine):

27.The Catholic understanding also sees faith as fundamental in justification. For without faith, no justification can take place. Persons are justified through baptism as hearers of the word and believers in it. The justification of sinners is forgiveness of sins and being made righteous by justifying grace, which makes us children of God. In justification the righteous receive from Christ faith, hope, and love and are thereby taken into communion with him. This new personal relation to God is grounded totally on God's graciousness and remains constantly dependent on the salvific and creative working of this gracious God, who remains true to himself, so that one can rely upon him. Thus justifying grace never becomes a human possession to which one could appeal over against God. While Catholic teaching emphasizes the renewal of life by justifying grace, this renewal in faith, hope, and love is always dependent on God's unfathomable grace and contributes nothing to justification about which one could boast before God (Rom 3:27).

and later in the same document:

37.We confess together that good works - a Christian life lived in faith, hope and love - follow justification and are its fruits. When the justified live in Christ and act in the grace they receive, they bring forth, in biblical terms, good fruit. Since Christians struggle against sin their entire lives, this consequence of justification is also for them an obligation they must fulfill. Thus both Jesus and the apostolic Scriptures admonish Christians to bring forth the works of love.

38.According to Catholic understanding, good works, made possible by grace and the working of the Holy Spirit, contribute to growth in grace, so that the righteousness that comes from God is preserved and communion with Christ is deepened. When Catholics affirm the "meritorious" character of good works, they wish to say that, according to the biblical witness, a reward in heaven is promised to these works. Their intention is to emphasize the responsibility of persons for their actions, not to contest the character of those works as gifts, or far less to deny that justification always remains the unmerited gift of grace.