Declaring the nation one step closer to being drug-free, President Reagan signed major legislation Friday that creates a Cabinet-level drug czar and gives police and the courts "a new sword and shield," including the death penalty for traffickers who kill.

During an emotional ceremony in the East Room of the White House, Reagan dedicated the moment to his wife Nancy, who made the "Just Say No" anti-drug campaign for youngsters the centerpiece of her tenure as first lady."And now in the eleventh hour of this presidency, we give a new sword and shield to those whose daily business it is to eliminate from America's streets and towns the scourge of illicit drugs," Reagan said.

"Our battles aren't fought by any single person, nor can they be won by any single bill," Reagan told the audience in the glittering, chandeliered room. But the president lauded the bill's tough approach toward so-called "recreational" drug users, as well as its federal death penalty for anyone convicted of drug-related killings.

"We are one step closer . . . to an America that is drug free," the president said as he stepped forward to sign the bill.

The chamber was packed with members of the Cabinet and military, congressional supporters, and police officers and private citizens involved in several national anti-drug education programs.

Vice President-elect Dan Quayle was in the audience, seated next to House Speaker Jim Wright. Although President-elect George Bush made a campaign pledge to put Quayle in charge of the nation's battle against drugs, the bill forbids the "drug czar" from holding another federal post.

Bush, at a news conference in Florida on Monday, indicated he might ask the new drug official to report to Quayle on his activities.

In his remarks, Reagan praised the members of Congress for their efforts, noting that the bill was the product of many days of intense debate in the waning days of the session. But he injected a personal note when he asserted that the measure also represented a victory for his wife.

"This is a very special occasion for every one here, especially Nancy. For eight years, she has led the fight to not only rid our society of drugs, but to banish any lingering tolerance of the notion that drugs are cool or hip," he said. "The nation now acknowledges what Nancy has been saying for the past several years, that drugs give a false high."

After giving his wife a big hug and kiss on the mouth, the president presented Mrs. Reagan with the pen he used to sign the four-inch thick bill.

Overall, the bill aims to battle the use of illegal drugs through stricter law enforcement, tougher penalties, and increased treatment, rehabilitation and education. It also outlines a fund to help drug-producing countries suppress illicit substances.

But it actually provides only about $500 million for spending, which barely covers a third of the $1.4 billion in first-year costs envisioned by the bill.

The law grants the new official virtually unprecedented powers, particularly in the right to intervene in the budget-making process of government agencies.

The 30 or so agencies involved in anti-drug programs will be required to submit their proposed drug budgets to the czar.