I know of nothing in the Pali canon to suggest that the Buddha thought that everything was perfect as it was. His emphasis was more on the fact that everything we can experience is unsatisfactory (“Sabbe sankhara dukkha”). Digging a little deeper into that statement, we can find that the “problem” of dukkha is that we in fact expect that there are experiences we can have that are satisfactory. And we seem to spend our entire lives pursuing those experiences, and trying to avoid unpleasant ones. But as the Buddha pointed out, everything that supports our experiences is impermanent, and thus changing (“Sabbe sankhara anicca”) and so no experience can in fact provide any kind of lasting happiness, peace, or security.
This perspective might sound a little bleak, and so far it is. But there’s more. Once we accept that all experiences are changeable, and we cease to expect any individual experience to provide lasting happiness, peace, or security, we can actually attain the happiness, peace, and security that we’ve been seeking all along. So in a sense, the problem is not with “things” (experiences, etc.) but with our attitude to them. However I don’t think the Buddha would have ever then made the leap to saying that everything is perfect. This would be a highly misleading statement, because things are quite obviously, and on very important levels, not perfect. There is war, famine, poverty, discrimination, etc., and the Buddha in no way encouraged us to ignore these things.
This Fake Buddha Quote is quite widespread on the internet, but it hasn’t, at least in this exact form, made it into many books yet. So far I’ve only found it in Good Day, Bad Day: Teaching as a High-Wire Act, by Ken Winograd (2005), page 44; and Seven Masters, One Path, by John Selby (2012), page 77.
The Winograd quote is interesting, because it presents the quote in the context of a poem:
All things are perfect
Just as they are.
A book from 1994, The Joy of Sects, by Peter Occhiogrosso, has the Buddha saying
How wonderful. How wonderful. All things are enlightened exactly as they are.
This comes from a Zen tradition, which I’ll allow Bernie Glassman and Rick Fields’ 1996 Instructions to the Cook to explain:
What did the Buddha discover? There are many different answers to this question. But the Zen Buddhist tradition I studied says simply that when the Buddha attained realization, he opened his eyes to see the morning star, and exclaimed. “How wonderful, how wonderful! Everything is enlightened. All beings and all things are enlightened just as they are.”
And this story is found in Dogen’s Shobogenzo:
Shakyamuni Buddha said, “When the morning star appeared, I and the sentient beings of earth simultaneously attained enlightenment.
This story isn’t found in the Pali canon, where the Buddha’s first words after awakening (according to the Pali commentators) were:
Through many a birth in samsara have I wandered in vain, seeking the builder of this house (of life). Repeated birth is indeed suffering!
O house-builder, you are seen! You will not build this house again. For your rafters are broken and your ridgepole shattered. My mind has reached the Unconditioned; I have attained the destruction of craving.
So what we seem to have, as best I can figure out, is that the Zen tradition evolved a story of the Buddha’s exclamation at the time of his enlightenment, which is along the lines of the Buddha announcing that “all beings are awakened,” and this turned into “all things are awakened,” and in turn this turned into “all things are perfect.”
But it may not be as straightforward as this. In 1975’s Zen Philosophy, Zen Practice, by Thích Thiện Ân, we read:
When we attain the actualization of the Supreme Way, we come to realize that all things are perfect just as they are.
This teaching of all things being perfect seems to have its own place in the Zen tradition.
And it’s an experience that can arise in meditation as well. I’ve had deep meditations myself in which time and space disappear, and there is a profound letting go in which all things appear to be perfect, just as they are.
Of course this teaching (“all things are perfect”) has resonances in Christian thinking, which may be one reason it’s caught on. Thomas Aquinas’ Summa Theologica has “Existence is the most perfect of all things.” Spinoza also made similar statements.
It always helps the spread of a Fake Buddha Quote when the saying in question resonates with pre-existing ideas.