May 29 (Bloomberg) -- The Obama administration took actions that averted a second Great Depression and now needs the American people to be patient as the recovery gathers steam, senior White House economic adviser Austan Goolsbee said.

“I am thrilled, overjoyed that we aren’t all out of our jobs and we have prevented the Great Depression,” Goolsbee said at a forum last night on the economy at Bloomberg LP headquarters in New York. “It is unrealistic to think you are going to solve all our problems in a three-month period.”

Goolsbee, 39, faced questions about the impact of President Barack Obama’s economic policies from fellow panelists Jack Welch, former chief executive officer of General Electric Co., Meredith Whitney, a former Oppenheimer & Co. stock analyst, Joseph Stiglitz, a Nobel Prize winner for economics, and Oliver Sarkozy, co-head of financial services for the Carlyle Group LP.

The forum on economic prognostication, co-sponsored by Vanity Fair and titled “No Visibility Ahead: Predicting What’s Next,” produced sharp division on the wisdom of Obama’s $787 billion stimulus package that Congress approved in February and the president’s other fiscal policies, as well as the sustainability of the first indications that recovery from the financial crisis has begun.

Obama’s budget proposal “is from the moon,” Welch, 73, said.

Referring to positive economic signs, Sarkozy said: “If there weren’t green shoots, we should all be shooting ourselves.”

Fiscal Plan

Expressing skepticism about Obama’s fiscal proposals Sarkozy said: “Solving a problem that is generated by the amount of debt that sits in the system by borrowing more is a fool’s game. The extent of the stimulus is unsustainable.”

Goolsbee said the administration had no choice but to inject massive amounts of money into the economy.

“If you tried to slash spending and raise taxes you would repeat what drove us into the Great Depression,” he said. “Treasury and the administration have embarked on a whole bunch of policies that have eased the credit spread quite substantially. There is no question that it is going to be a bumpy ride, but it is a signal achievement to be less worse.”

Sarkozy, 39, the half-brother of French President Nicolas Sarkozy, said the administration should be wary of premature optimism that the worst of the financial crisis is over.

“We have to be careful not to kid ourselves that we are out of the woods,” he said. “The danger is we build up this optimism, only to have an additional disappointment which will cause what we lived through in October to seem like child’s play.

‘Bad Game’

Welch called Obama’s economic strategy a “bad game” and said his budget “justifies a lot of bad behavior.”

Stiglitz, who won the Nobel Prize in 2001 and is a professor at Columbia University in New York, said a greater division in U.S. society could result from widening income gaps between union workers and management.

“What has happened in the U.S. in the last 30 years has not been good for workers,” said Stiglitz, 66. “There has to be agitation to correct that. If we don’t, the kind of divide in our society could get much worse.”

Looking at current markets, Whitney, 39, said stocks and treasuries were “overvalued.” The New York-based analyst, who correctly predicted in 2007 that Citigroup Inc. would cut its dividend, created Meredith Whitney Advisory Group after leaving Oppenheimer earlier this year.

Sarkozy advised investment in “very short term treasuries.”

Welch argued for an aggressive business model. “Cash is king,” he said. “Get every drop you can and hold onto it, and communicate like never before to your people. Then, if you have the cash and communicate, have taken care of your best, go out and buy and bury your competition. Now is the time.”

Goolsbee asked for a “rain check” on rebuilding the U.S. financial system. He said that in “relatively short order” new and comprehensive regulatory oversight would be set in motion.

To contact the reporter on this story: William Varner in New York at wvarner@bloomberg.net

Last Updated: May 29, 2009 00:01 EDT