Without some basis in fact — without at least a basis in the recognized structure of reality on some general level — fiction would instead be gibberish. And most fiction involves considerable factual elements — it describes a familiar world and may even involve passing reference to specific, familiar, real-life persons. Some fiction makes more than passing reference.
Satire normally involves more literal truth than does ordinary fiction. because some element of the real-world is a target, perhaps for purposes of commentary or perhaps merely as an opportunity for absurdity.
Harlan Ellison has sometimes asserted that he might be called a
paid liar. He does, after all, state things as if they were true that he knows to be false. But his fiction doesn't quite fit the ordinary notion of lying. Under this notion, to lie is to make a statement which one knows to be false, and to make it with intent to deceive. Ellison makes false statements, but presumably expects his readers to identify the fiction as such, and hence not to be deceived. Backing-up, the key is not merely that the false statement is presented in just any way as if true, but in a manner that one might hope and expect to be presuasive. Even if we should insist that any statement that one knows to be false would constitute a lie, clearly there is an important difference between willfully false statements which are hoped to mislead and those which are expected to be treated as falsehoods.
Sometimes the author of fiction relies upon immediate context to indicate the work as fiction — the work is wrapped (as by the label
novel). In other cases, the content is sufficiently at odds with expectations that it would not be believed by anyone with at least an ordinary degree of rationality.
Satire — genuine satire — reveals its fictional content, as distinct from its factual content, in that the fictional component is presented to amuse by violating established expectations, while the non-fictional component does not itself seem an attempt to be funny.
Unfortunately, this convention, like many social institutions, is not consciously discerned by most of those who rely upon it, and that lack of awareness creätes an opportunity to use ostensible satire as a vehicle for deception. If one insinuates false-yet-unamusing assertions within a work, these may be taken as part of the factual component by a large share of the audience. If someone should protest that false statements are being presented as fact, that someone can be dismissed as ignoring that the work be satirical. (This dismissal will be more effective if the work also has falsehoods that few would take seriously.) Few people will be positioned to respond that genuine satire does not present deliberate falsehood as fact is presented. And so purported satire becomes a vehicle for deliberately false statements made with the intent to deceive. Lying is labelled
satire, and ordinary defenses fail against it.
The use of ostensible satire to lie has been very popular since the rise of the Baby Boom Generation. But it's not as if one can give a public lecture on how to lie in this manner without undermining the device. In consequence, a lot of people are using it to lie without quite understanding how and why it works; others, more oblivious, have concluded that all these falsehoods really have been amusing, and imagine that when they too string-together falsehoods, these must likewise be amusing.
Yester-day and to-day, there was a fiasco on the American political left. First, Roger Simon made what seems an attempt to satirize the circumstances of Paul Ryan. The attempt was perhaps sincere, but it's hard to find much funny in it. And it was taken to be mostly factual by some of Simon's own tribe, including various prominent members. Tobin Harshaw is blaming this confusion on the literalism of Americans, but the primary cause is not so much literalism as it is the degeneration of the concept of satire.
(Of course, I expect those on the left who believed Simon's claims to attempt to excuse themselves by claiming that the political right has become so absurd that it is practically impossible to tell fact from fiction.)
 The real thing satirized may be a story or idea of something that is itself unreal; but, without some real referent (such as a story or idea), one does not have satire.