President Barack Obama debates with Republican presidential candidate Mitt Romney on October 22, 2012 in Boca Raton, Florida. - 

President Barack Obama took budget watchers by surprise at the third Presdintial debate Monday night when he said that a trillion dollars in automatic spending cuts “will not happen.”

He was referring to what’s called sequestration, which came about in 2011 as part of the debt-ceiling deal. If Congress doesn’t cut the budget deficit on its own by January, brutal automatic cuts kick in, slicing half a trillion from defense, and an equal amount from domestic programs. There’s plenty for Democrats and Republicans to hate about it.

“Certainly everyone understands that it would almost be economic suicide to allow the full impact to take place,” says Neil MacKinnon with VTB Capital in London.

Market watchers abroad worry the cuts could damage the U.S. economy and ripple across the world. But to avoid the cuts, as President Obama vowed, Republicans and Democrats have to make a deal to trim the deficit between now and January. So far, they’ve been deadlocked.

Republicans have dug in their heels on cutting military budgets, and Democrats want higher taxes for the wealthy. So stopping the cuts will take much more than four words from the President on a debate stage.

Follow Mark Garrison at @GarrisonMark