A launch failure is always catastrophic for the onboard instrument ;-)

They're not proposing to cancel JWST.

It's just that its $6.5B price tag is overwhelming the whole astrophysics science effort. The original design was supposed to come in around 0.5B. See

http://www.sciencenews.org/view/feature/id/71607/title/Star_...

Unfortunately, with JWST sitting out there as its own line-item in the NASA budget (as opposed to rolled in with the rest of Astrophysics), there's concern in the community that it will be a tempting target for a Congress anxious to cut anything that moves.