Not as much as you'd think.
Well, it's not so much what he understands, as what he believes. Democrats refuse to work on any deficit reduction that does not include tax increases. They euphemistically cite those increases to "increase revenue," but that's not what motivtes Democrats, particularly Obama. Here's why he wants tax increases:
To be more "fair"
To "spread the wealth around"
Because at a certain point "you've made enough money."