The Treasury Department has lowered the expected loss from the TARP, which could allow more money to free up for job creation in a future public investment bill.

The Treasury Department expects to recover all but $42 billion of the $370 billion it has lent to ailing companies since the financial crisis began last year, with the portion lent to banks actually showing a slight profit, according to a new Treasury report.

The new assessment of the $700 billion bailout program, provided by two Treasury officials on Sunday ahead of a report to Congress on Monday, is vastly improved from the Obama administration’s estimates last summer of $341 billion in potential losses from the Troubled Asset Relief Program. That figure anticipated more financial troubles requiring intervention.

The officials said the government could ultimately lose $100 billion more from the bailout program in new loans to banks, aid to troubled homeowners and credit to small businesses.

Still, the new estimates would lower the administration’s deficit forecast for this fiscal year, which began in October, to about $1.3 trillion, from $1.5 trillion.

Looking at just the TARP when assessing bank bailouts is like looking at the cocktail weenies when assessing a seven-course meal. The Federal Reserve, FDIC and other special-purpose programs have lent the banks and subsidized them in low-cost loans to the tune of trillions.

Nevertheless, when people think about bailouts, they think about TARP. And the TARP is actually not going to be that expensive. More important, the money in the TARP is already appropriated, making it easier to plow that money back into a jobs bill. House Democrats want to transfer at least $70 billion from TARP into road-building and other infrastructure projects. And the White House seems to agree with them.

Using TARP funds for job creation probably would require additional legislation, though White House officials would not provide details of the administration’s plans ahead of Obama’s speech. Asked whether Obama endorses House Democrats’ proposals to use some bailout money for job creation, Gibbs said, “It’s certainly being looked at, yes.”

The President will unveil a series of job creation policies tomorrow.