THE WEEK

By KATHLEEN ADAMS, JANICE HOROWITZ, LINA LOFARO, BELINDA LUSCOMBE, MICHAEL QUINN, JEFFERY C. RUBIN, ALAIN L. SANDERS AND SIDNEY URQUHART

NATION

THE G.O.P.'S RX FOR MEDICARE

House Republicans formally unveiled their long-awaited and politically risky proposal to overhaul Medicare--a sketchy blueprint full of wiggle room that provides few details of where the G.O.P.'s $270 billion in desired savings will be realized. The proposal would allow seniors to opt for HMOS and private insurance plans (with the government footing the presumably cheaper bill) or to stay with the traditional fee-for-service program and face increasing premiums (including even bigger increases for affluent seniors). The unveiling of the proposal didn't stop Democrats from renewing some familiar criticisms--namely that the Medicare cuts are intended to fund a G.O.P. tax cut for the wealthy--nor the President from brandishing a veto threat for the plan.

SENATE REFORMS WELFARE

Amid scattered flurries of harsh rhetoric and pre-campaign posturing, the Senate spent the week hammering out the details of a sweeping overhaul of the nation's welfare system and stood poised to pass the bill this coming week. The historic measure would convert existing entitlement programs into capped block grants to the states with virtually no strings attached. The legislation, which its authors hope will save $70 billion over seven years, also contains a five-year limit on benefits, as well as work requirements. Democrats and moderate Republicans succeeded in increasing child-care funding and stripping provisions that would have denied cash benefits to unwed teenage mothers. Conservative Republicans won a provision that financially rewards states that reduce out-of-wedlock births. The final bill will have to be reconciled with a similar but harsher House measure.

THE RUBY RIDGE PROBE

FBI marksmen told a skeptical Senate panel that the 1992 fatal shooting of white separatist Randy Weaver's wife by an FBI colleague was justified. Reason? The gun-toting Weavers, caught in a standoff with agents, posed a threat to a circling FBI helicopter. Federal marshals involved in the shootout that precipitated the siege testified that they believe Weaver accidentally killed his son--and not they, as Weaver has charged.

MORE BAD NEWS FOR THE FBI

Though the FBI said its internal review has uncovered no evidence of wrongdoing, the Justice Department announced it was looking into allegations made by FBI scientist Frederic Whitehurst that personnel at the agency's storied crime lab may have provided misleading or fabricated evidence in a number of major cases. One set of defense attorneys--O.J. Simpson's--wasted no time in saying they would seek to call Whitehurst as a witness in their case to undermine FBI tests and testimony introduced by prosecutors.

THE SIMPSON TRIAL

As for the O.J. Simpson trial, the jury's increasingly restive mood had a number of interesting effects on the other players. Judge Lance Ito grew even testier, the defense petitioned (unsuccessfully) to have the jury desequestered, and--most shocking of all--prosecutors began presenting evidence with focus and dispatch. Even though the defense hasn't rested, the prosecution began its rebuttal with a series of photos and videos showing O.J. wearing leather gloves during football broadcasts. An expert testified that the gloves in the photos are the same rare model as the bloody ones in evidence before the jury. Prosecutors also presented more expert testimony on blood, dna, fibers and imprints to try to link O.J. to the murders.

ABU-JAMAL APPEAL DENIED

Despite a summer of demonstrations and protests, a judge in Philadelphia refused to grant a new trial to convicted cop killer Mumia Abu-Jamal. The journalist has spent the past 13 years on death row for the 1981 murder of a police officer, after a trial that his defenders claim was tainted by police misconduct and judicial unfairness. Abu-Jamal's lawyers promised to appeal the "outrageous" ruling in the Pennsylvania Supreme Court.

I WILL, I WON'T, I WILL ...

Does Colin Powell want to run for President? And is he more likely to run as an independent or a Republican? The former Chairman of the Joint Chiefs of Staff continued in his cagey noncommittal mode, saying he won't make any decisions until he finishes a book tour promoting his autobiography. But in an interview with abc's Barbara Walters, Powell for the first time set down some markers regarding his stands on national issues: he backs abortion rights, affirmative action and gun control and opposes organized school prayer. Which led numerous pundits to wonder how he could ever manage to win the Republican nomination.

IOWA'S FIRST CASUALTY

California Governor Pete Wilson, barely out of the presidential-campaign starting gates in terms of poll standings and fund raising, announced that he will be closing down his Iowa operations (the state's caucus is the G.O.P.'s first major winnowing contest next year) to focus on the key New Hampshire primary.

OPERATION "INNOCENT IMAGES"

Culminating a two-year undercover kiddie computer-smut investigation, FBI agents arrested at least a dozen people and fanned out to search more than 120 homes and offices around the country. The federal probe--the first of its kind--monitored America Online, the nation's largest commercial computer network (AOL cooperated in the investigation) in order to nab people suspected of using cyberspace to distribute child pornography or arrange sexual encounters with minors. More arrests are expected.

WORLD

NATO HALTS BOSNIA BOMBING

NATO called a three-day suspension of its bombing campaign against the Bosnian Serbs after the Serbs agreed to stop their shelling of Sarajevo and move heavy weapons outside a 12.5-mile exclusion zone. At week's end the Serbs appeared to be grudgingly moving the first of their more than 300 artillery pieces ringing the Bosnian capital. After the Serbs agreed to allow U.N. flights into Sarajevo, French Defense Minister Charles Millon arrived aboard a military plane carrying a load of flour--the first aid to get in by air in five months. Deadline for completion of the Serb withdrawal is Wednesday. "If there's any sign they're messing around," said a senior U.S. official, "the bombing starts again."

SERB REFUGEES FLEE

Meanwhile, the Bosnian army and allied Croatian troops advanced in western Bosnia, forcing as many as 60,000 Serb refugees to flee from areas they have held for much of the past three years. U.N. officials believe the Serbs may be conceding the territory so willingly because it is land they would probably be forced to give it up in a peace settlement anyway.

ATTACK ON U.S. EMBASSY

A rocket-propelled grenade fired by a masked assailant pierced an outside wall of a U.S. embassy building in Moscow and destroyed a copying machine in an unoccupied office. No one was injured in the attack, which was launched at rush hour from across one of the capital's busiest and broadest thoroughfares. Russian authorities, who have no suspects in the case, called it "the act of a lone maniac," while others speculated that it represented a protest against NATO's air campaign against Bosnia's Serbs.

BELARUS DOWNS U.S. BALLOON

Two Americans were killed when their sport balloon was shot down by a Belarussian military helicopter during an international ballooning race. Though the U.S. State Department called the downing "absolutely indefensible," the Belarussian government did not formally apologize, saying Air Defense troops had tried unsuccessfully to make contact with the "flying object." Alan Fraenckel and John Stuart-Jervis, the balloon's pilots, died while competing in the Gordon Bennett Balloon Race, in which contestants vie to cover the greatest distance possible in a single flight; the race had begun in Wil, Switzerland.

MACEDONIA, GREECE TALK PEACE

Greece and the former Yugoslav republic of Macedonia signed an agreement that will lift Greece's crippling 19-month trade embargo against its northern neighbor. In return, Macedonia promised that it will make no territorial claim beyond its current borders and that it will stop using on its national flag the 16-point Star of Vergina, which Greece angrily insists is its own. The two countries, which will establish diplomatic relations, have yet to resolve a much thornier issue: Greece says use of the name Macedonia should be reserved for its northern province.

SWISS FIND HOLOCAUST ASSETS

After decades of insisting that there was little money left in dormant World War II accounts, the Association of Swiss Bankers announced that it had uncovered more than $34 million in abandoned accounts that might have belonged to victims of the Nazi Holocaust. Responding to pressure from Jewish groups and descendants who (optimistically, the bankers say) speculate that billions lie in such accounts, the bankers said they would create a special office to help search bank records--for a fee, naturally.

BUSINESS

A STRONGER DOLLAR

For the first time since January, the dollar inched back above 100 Japanese yen. Administration officials credited Treasury Secretary Robert Rubin's financial machinations for the recovery.

PEACE TREATY IN THE DISC WARS

Consumer-electronics companies managed to avoid a replay of the VHS-Beta wars of a decade ago when they agreed to a single format for a new multi-use digital videodisc. The new disc, the size of a CD, can be encoded with movies, music or other digital data. But not to worry: the new disc players, which should be in stores late next year and cost around $500, will also be able to play current CDs and CD-ROMS.

SCIENCE

OZONE HOLE GROWS

The thinning of the ozone layer over Antarctica is more severe this year than ever before and covers nearly 3.9 million sq. mi., an area roughly the size of Europe. Scientists reported that ozone levels are 10% lower this August than last year, which was the previous record low. The ozone layer screens out ultraviolet rays that can cause skin cancer and damage crops.

--By Kathleen Adams, Janice Horowitz, Lina Lofaro, Belinda Luscombe, Michael Quinn, Jeffery C. Rubin, Alain L. Sanders and Sidney Urquhart