FEDERAL BUDGETING is an inexact science at best, but the way the Obama administration's proposed budget treats the terrorism insurance backstop doesn't even approach a scientific method.

As we report on page 18, the Obama budget asserts that it will cut the program's cost by about $250 million through increased deductibles and copayments paid by insurers participating in the program. The proposal also would prohibit coverage of acts of domestic terrorism.

We have a few problems with this approach.

To begin with, the program really doesn't cost the government anything beyond administrative expenses. Only a catastrophic terrorist attack would trigger the backstop and disburse federal funds to insurers that paid claims arising from the attack.

Fortunately, there have been no catastrophic U.S. attacks since Sept. 11, 2001, and no federal outlays to cover attacks since the program was established in 2002. Any savings the budget purports to achieve by scaling back the program are at best potential and at worst fictional.

Removing acts of domestic terrorism from events to which the backstop would respond is an even worse idea. A terrorist attack is a terrorist attack, regardless of whether the order came from inside or outside the United States. In addition, determining whether an attack is of domestic or foreign origin might take weeks or months, if a determination is ever made. Meanwhile, the need to pay for the devastation would remain.

There are places where the administration can achieve real savings, but scaling back the terrorism insurance backstop isn't one of them. We hope Congress remembers the delicate compromises and hard work that established and extended the program, and leaves the backstop intact.