I'm posting it with advance apologies for the length but it's really all the info a Catholic needs to take the wind out of Luther's sails on this spurious objection to the Church.
Indulgences: The World's Most Misunderstood Spiritual Gifts
by Mark Shea
Most Catholics live and die blissfully unaware that the Church even offers indulgences anymore. (A Catholic friend to whom I mentioned I was writing this article said, "They went out with Vatican II, didn't they?") Practically no Catholic gives much thought to them. They languish in the Church's attic of doctrinal knick-knacks.
So why bother with them? Two reasons. First, indulgences (while relatively insignificant in the grand scheme of things) are nonetheless minor tributaries to the Church's river of grace and are therefore intrinsically interesting. But second (and most important), a proper understanding of indulgences among laypeople is surprisingly helpful toward healing rifts in the Body of Christ. For though indulgences are neglected by most Catholics, nervously curious Protestants looking at Rome still find them scandalous. Indeed, the very word "indulgence" can set many a Protestant heart aquiver with the deep foreboding that, whatever papists say, they are slaves to works salvation--a suspicion only enhanced when Catholic ignorance lends credibility to the fear that Rome keeps its flock in the dark about what she really teaches.
I know these feelings quite well. And I do not disagree that Luther had a point about the "scandalous traffic in indulgences" of which the Renaissance Church was guilty. Even the Council of Trent agreed with that. But, as a convert, I came to discover the Renaissance Church was guilty, not of the theology of indulgences (which is, as we shall see, simply a theology of charismatic grace) but of simony--that is, of sinfully selling that "grace" for cold cash like a stock investment. So then, Luther was right--partly. But Rome was (in her theology if not her Renaissance practice) right too. How? Catholic theology has an incorrigible knack for obscuring marvelous insights in confusing terminology. Thus, for instance, she speaks of "temporal punishment for sin" which sounds to Protestants as though Jesus didn't do enough and you still have to endure extra torture so you'll be fully "punished" in addition to the 80% or 90% of the punishment He took for you.
In reality, "temporal punishment" is just Catholicese for what Protestants call "chastisement." That is, it is pain unto life such as Scripture refers to when it tells us God punishes all those he loves as his children. (Hebrews 12:5-6). In short, temporal punishment is part of how God redeems our sinful actions and turns their consequences into occasions of sanctity rather than damnation. For as Paul says, "suffering produces perseverance; perseverance, character; and character, hope. And hope does not disappoint us, because God has poured out his love into our hearts by the Holy Spirit, whom he has given us." (Romans 5:3-5). This is the common sense reason why repentant murderers are forgiven, yet not freed from prison. The consequences of the sin remain, but, by grace, they are turned to glory.
Very well then, as with the confusing term "temporal punishment" this Catholic knack for packaging a great idea in opaque terminology is particularly acute in the notion of indulgences. For indulgences depend on a term which Protestants find especially sinister: the "treasury of merit." What is "merit"? Well, it isn't "extra righteousness earned by particularly nice people who pitched in to help our well-meaning but inadequate Savior's effort at redemption" (which is what many people think "merit" means). Rather "merit" is an old-fashioned term whose modern equivalent (according to theologian Hans Urs Von Balthasar) is "fruitfulness."
Now we're in Protestant territory! Christians, as all Protestants know, are graced to bear fruit by the work of Christ (John 15 and all that). We are commanded by God to bear grace to the world and to each other. For as C.S. Lewis observes, God "seems to do nothing of himself which he can possibly delegate to his creatures." We are thus to bear fruit by acting as agents of grace, doing the will of God and generally "wielding our little tridents." And the power of the Holy Spirit (as all Christians know) is absolutely necessary for this fruit to exist at all, much less ripen. So, in bearing fruit, we are not talking about "works salvation." We are talking about cooperation with grace. Now one of the manifestations of grace, as every charismatic knows, is the charism or spiritual gift. Spiritual gifts are graces given via the members of the Church so that the Body is built up in love (Rom. 12, 1 Cor. 12, Eph. 4:11-16). Some of the gifts given to the Church are more famous (tongues, prophecy, healing, etc.). But nestled right in the middle of them is a gift which does not get talked about much. That gift is the gift of mercy. (Rom. 12:8)
An indulgence is a formal apostolic enactment of the gift of mercy. It is directed at members of the Catholic communion under apostolic authority through their baptism into the Church. That means that indulgences are not a form of earned justification (since that was already freely given in baptism), but are instead given to lessen the temporal punishment due to sin already forgiven. In short, they are an aid to growing in holiness, not a coupon for buying the forgiveness of God.
An example: I, a man with a bad temper, get baptized, calling on the Lord to be saved. What does that make me? Usually it makes me a Christian man with a bad temper since the gift of new life is grace, not magic. Baptism is not an instant cure-all. It is a gate into the transforming grace of God which, with our cooperation, can eventually heal our brains, hearts and bones.
So then, I come home from baptism full of transforming grace and, finding you did not give me the chocolate Easter bunny I wanted, break your window in a rage. I repent. I am forgiven by God and you. All my guilt is taken away by the blood of Christ the instant I repent. But I still must pay for the window and I still, by grace, have to do something about my temper. Moreover, I am strapped for cash (since I have several broken window lawsuits pending which did not magically disappear when I was baptized). But (asking for God's help) I do what I can to pay you back. You (a Christian with the gift of mercy) forgive the remainder of the debt and even give me a little something so I can afford anger management counseling and legal fees. You have, in effect, granted me a partial indulgence, relieving the temporal punishment for my already-forgiven sin and helping me toward sanctification with your charism.
So it is with the Church. For she has been graced with all charisms, graces, gifts and fruit (called by medieval theology "the treasury of merit" but referred to by St. Paul as "every spiritual blessing in Christ" (Eph. 1:3). And as the communion of graced believers, the Church has the power to authoritatively administer that blessing where she wills, just as Paul had (Eph 3:2). Indeed she is simply doing as St. Paul's told her to and using her spiritual gifts, especially the gift of mercy, in granting indulgences by her apostolic spiritual authority--the authority of the graced believer (1 Cor. 12:31).
Long ago, such mercy was visible in the lessening of severe penances required of those guilty of serious sin--penances which, but for indulgences, could last months or even years. (That's why old Catholic prayer books offer "Indulgences of 365 days attached to doing thus and so." This originally referred, not so much to "days in Purgatory" [there are, after all, no clocks there], but to earthly days of penance.) But that leaves us in a bit of a puzzle since nowadays, the relaxation of those severe penances makes the grace of indulgences largely invisible. To be sure, the Church still says an indulgence can, in some unfathomable way, help us in the process of sanctification. (And proofs of a negative are hard to come by.) But the nature of that help is very mysterious. Maybe the grace comes in the form of "extra strength" to love under difficult circumstances. Maybe some other way. I, at any rate, don't know.
"But," my Evangelical friends blurt out, "people have to earn indulgences. That's salvation by works!" No, that's pastoral common sense akin to St. Paul's dictum "If a man will not work, he shall not eat." (2 Thes. 3:10) Similarly, if a sinner will not repent by acting in obedience to grace, he shall not receive an indulgence. For indulgences are like student grants for people who want to study sanctity, not like free diplomas for slackers who want to party. They are spiritual gifts to help us work out our salvation with fear and trembling, not carte blanche so that we needn't bother with sanctity at all. And even so, they are granted with incredible ease and frequency for the most trifling acts of obedience to grace--like saying an "Our Father" or reading Scripture for 15 short minutes. Evidently, God and His Church want us to be blessed and graced!
So in the end, this Evangelical-gone-Catholic came to realize what a great pity it is (and one long overdue to be rectified) that many honest Protestants like myself have feared indulgences as nothing but a corrupt medieval money-making scheme. They are nothing of the kind originally and, though their good name was dragged through the mud by Tetzel and his ilk, they have been nothing of the kind since Trent. It is high time lay Catholics make clear, in Protestantese, that indulgences don't make cents, they make sense!
This is truly an outstanding explanation of indulgences, written in contemporary layman’s terms. Thank you so much for taking the time and effort to post it to the thread. God bless!
**So in the end, this Evangelical-gone-Catholic came to realize what a great pity it is (and one long overdue to be rectified) that many honest Protestants like myself have feared indulgences as nothing but a corrupt medieval money-making scheme. They are nothing of the kind originally and, though their good name was dragged through the mud by Tetzel and his ilk, they have been nothing of the kind since Trent. It is high time lay Catholics make clear, in Protestantese, that indulgences don’t make cents, they make sense!**
Excellent Mark Shea! Was this on a tape or on the internet?