Ed Henry is a CNN White House correspondent.

WASHINGTON (CNN) -- It's the best of times, it's the worst of times -- a tale of two legacies as President Bush prepares to ring in the final year of his presidency.

President Bush leaves the White House on Friday to spend the Christmas holiday at Camp David, Maryland.

Sitting in the front row for Bush's final press conference of 2007 on Thursday, I was struck by how it's a mixed bag for the president on three key issues -- his relationship with the Democratic Congress, the state of the U.S. wars in Iraq and Afghanistan, and the health of the U.S. economy.

How Bush handles those three issues in 2008 will go a long way toward figuring out his legacy in 2009 and beyond.

His relationship with Democrats on Capitol Hill is important because it will hold the key to how Bush's domestic agenda fares in his final year.

Usually in election years, not much gets done because each side is dug in, but 2008 may be different for one reason: Bush and Democratic leaders like House Speaker Nancy Pelosi, D-California, each have incentive to come together on at least a few issues, like maybe children's health insurance. Bush needs legacy items, while Pelosi & Co. need some accomplishments to take to voters next November.

Bush noted the year ended on a "high note," with compromises on energy reform and a tax fix for middle- to upper-income families. But he also ripped Democrats for loading up the budget with too many pork-barrel projects and not finishing terrorist surveillance legislation.

Don't Miss Bush scolds Congress for funding pet projects

The bad news for Bush is that other than the Medicare prescription drug program he signed into law early in his presidency, his domestic legacy is thin. Even his signature education reform law, No Child Left Behind, is under fire with some conservatives and struggling to be reauthorized.

The good news for Bush, however, is that by brandishing his veto pen, he was able to prove this year he still carries a lot of clout. Plus, the Democratic majorities in the House and Senate are very thin.

That's a major reason why Democrats repeatedly failed to change Iraq policy -- and why Bush scored a major victory by getting $70 billion in new war funding with none of the strings Democrats originally wanted to attach.

But if the president wants to add some major domestic achievements to his legacy in 2008, he will have to put down the veto pen sometimes and show a willingness to compromise. And Democrats will have to prove they really want to meet the president halfway, too. We'll see -- to say this marriage is strained is an understatement.

Secondly, there's a very mixed picture emerging from the wars in Iraq and Afghanistan. For Bush, 2007 may be a turning point in which his "surge" policy helped improve security on the ground in Baghdad.

But the other goal of sending an additional 30,000 U.S. troops to Iraq was to give the Iraqi government breathing space for political reconciliation, an area in which little progress has been achieved.

While the president touted some modest success by the Iraqi government, he acknowledged there needs to be a lot more movement. "Are we satisfied with the progress in Baghdad? No," he said. "But to say nothing's happening is just simply not the case."

Then there's Afghanistan, sometimes known as the "Forgotten War" because it never seems to get as much media attention. And in fact, Democrats have accused the president of taking his eye off the ball by launching the war in Iraq.

While Bush has flatly rejected that claim, his administration is conducting a top-to-bottom review of the war in Afghanistan, and he's admitted some worry that NATO allies may not stay in the fight.

"And my biggest concern is that people say, 'Well, we're kind of tired of Afghanistan and, therefore, we think we're going to leave,' " he said. "That would be my biggest concern."

Pay attention to Afghanistan. Will there need to be a U.S. "surge" there? It may be the war that becomes much more of a front-page story in 2008 than Iraq, and ends up affecting the Bush legacy in a major way.

And finally there's the economy, which is also a mixed bag. Bush sounded upbeat by saying "the fundamentals are strong, that we've had strong growth for a reason: that we're competitive, we got flexible workplace, that we kept taxes low, exports are up."

But the president also recently admitted there are "storm clouds" over the economy, especially the mortgage crisis. It's stating the obvious that more anxiety in the financial markets -- or dare I say a recession -- will be another key to the Bush legacy.

For his part, the president often says he's not sitting around fretting his legacy. Although the fact that Bush will be jumping aboard Air Force One the second week of January for a trip to the Mideast -- to help push along a peace deal -- is a sign that the legacy question is in the back of his mind somewhere. E-mail to a friend

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