Well, a plain reading of the discussion tells me they were discussing the difference between fiction and a so-called "non-fiction memoire" from Frey. Frey is under attack (and rightfully so) because his story was marketed as non-fiction. Doctorow and Kushner both write fiction, even if historical.
So in that sense, Frey lied, but Doctorow doesn't.
Attempting what he called "some badly articulated French theory," Mr. Kushner said, "We're making a kind of reality that's coming increasingly to supplant the rock we are standing on."
But though both writers have appropriated historical events and figures for their fictions, neither admitted to complicity in the trend.
"Our justification and our salvation is that people know we're liars," Mr. Doctorow said. "The kind of genre-blurring done by the president of the United States is quite different. He is a storyteller, a fabulist, and presents as truth and facts stuff that is totally fictive."
With all due respect, the more I read this, the less I agree with you. Kushner seems to be criticizing himself and other writers for destroying the "rock" of truth that they are supposedly standing on, while at the same time justifying it. And Doctorow is not comparing fiction to non-fiction, but rather comparing himself to Bush.