Declaring everything as perfect as possible all the time blocks any initiatives aimed at actually improving things. Improving, as in, pointing out if something works sub-optimally, and going about applying fixes.
Your boss' attitude seems to have been designed to silence these voices exactly (and therefore they block any improvements).
— to keep an organization in good shape
To illustrate my point, I introduce the PDCA continuous improvement principle, used in quality management.
PDCA stands for:
- Check (as in check if it works as intended; does it actually present any flaws?)
- Adjust (if C had found something, let's fix it in this stage)
The latter two items, C and A are the feedback stage, where you:
- acknowledge shortcomings / learn from mistakes, and
- correct them as best as you can
Your manager's conduct is blocking these latter steps.
While this process is used in product design / development, I believe it illustrates well how acknowledging issues is an indispensable stage in improving things and fixing issues.
Any downside or conflict?
The difficulty seems to arise from how the above concept on its own does not seem to offer a ready answer for respecting authority. Admittedly, hierarchy and / or authority are things that a lot of organizations are utilizing in their operations to more or less extent.
At this point however, in your organization, someone needs to evaluate whether propping up authority unconditionally or addressing the company's (or department's) issues is more important.
If this happens in a small company, over the long term this seems to set things up for degradation in a wide range of aspects. (The last time I have experienced a pattern comparable to your situation (even if waaay less pronounced), it caused lingering frustration, and led to the company continuously losing talent.)
In preparation of things getting slowly worse — to an extent that you could find too much to tolerate — brush up on your CV and have a plan on how to move on if necessary.
Updated scope: a department or a subdivision
Let's see the specifics if this happens in a department or a sub-division of a large company:
In such case your manager is acting as a hype-man and a bouncer in one, defending- and getting company procedure enforced — "as unchallenged as possible"
This however does not change much about how problems in the department are suppressed. The detrimental outcome may however be mitigated by the influence from global company policy / culture, upholding the status quo; even in the face of continuous frustration.
The human factor
The tensions present in this environment seem to strongly impact how you feel on the "Esteem / feeling accomplished" level of Maslow's pyramid: as in, your voice is not being heard, and your contributions (in some very meaningful contexts) are dismissed even before their conception.
You don't need to blame yourself for frustration here. In this environment, it's not on you.
So, depending on how (un)well you take chronic frustration, consider keeping your CV up to date, and being prepared to move.