I think there is a third way to understand Trump's problematic relationship with the world of reality, facts and truth; and it does not exclude either of the explanations you propose.  While it is easy, and correct, to designate Trump as the Liar-in-Chief, I think he is better understood as the Bullsh*****-in-Chief." Several years ago, Harry G. Frankfurt published a book-length essay, "On Bullsh*t", in which he distinguishes between a liar and a bullsh*****, A liar knows the truth and is deliberately trying to communicate a falsehood. A bullsh***** neither knows nor cares what the truth is; he says only what he thinks serves his purpose in the moment. Trump knows, believes and cares about very little, other than about Donald J. Trump; he just conjures up bull in the moment. Consider the nonsense he is sending his team of liars out to try to diffuse the despicable lie about Obama wiretapping him. Imagine: Trump called Obama a "bad (or sick) guy"!