You know, the White House is a lot like small business -- Nancy and I live above the store. [Laughter]

Small business plays a vital role in American life. Many businesses -- well, they make everything from ice cream to shoes to computers. Small businesses are the biggest providers of new jobs, give the most employees the freedom to work part time, hire the most women, young people, and senior citizens. They embody innovation, provide economic diversity, and chart our path toward the products, markets, and jobs of the future.

And to remain engines of hope and prosperity, small businesses need a healthy economy. Just 3 years ago, the American economy was, as we all know, anything but healthy. We all remember those days. Government was growing like Goliath, wrecking the economy with punishing inflation and interest rates, a growing tax burden, and government regulations that were smothering economic growth. When an enterprising man or woman wanted to borrow money to start their own business, 21\1/2\-percent prime interest rates shut the door in their faces. When a small business wanted to buy a new plant or materials to expand, 12.4-percent inflation put opportunity beyond its reach.

When we took office, we made restoring economic vitality our top priority. We reduced the growth rate of government spending, pruned needless regulations, cut taxes, and passed an historic reform called tax indexing.

I always liked -- when I think about regulations, I always remember one of the favorite stories I had about bureaucracy long before I was here in Washington. And that was a fellow here in Washington that sat at a desk, and papers came to him, and he looked at them and decided where they should go, initialed them, and sent them on. And one day a classified document arrived at his desk. Well, he accepted it, saw where it should go, initialed it, sent it on. Twenty-four hours later, it came back to him. It said, ``You weren't supposed to see this. Erase your initials and initial the erasure.'' [Laughter]

Well, one of our reforms, also, was tax indexing. It means the government can never again profit from inflation at your expense. And today, we're seeing a surging economic recovery from Maine to California. Housing starts, factory orders, and real income are all up. The stock market has come back to life. Between the end of 1982 and the end of 1983, net private savings shot up nearly 50 percent to over $230 billion, making more funds available to the risk-takers and innovators who give small business their drive.

Small businesses have led the way in creating new jobs, and today more Americans have jobs than ever before in our history. Since the beginning of the recovery 15 months ago, nearly 5 million Americans have found work. And the unemployment rate has fallen to 7.7 percent, marking the steepest drop in more than 30 years.

Now, this isn't a Keynesian recovery produced by big-spending bureaucrats tinkering with aggregate demand. In fact, I don't know of a single Keynesian who predicted it. Instead, this recovery was created by the incentives of tax rate reductions, which shifted resources away from government back to American producers, savers, and investors.

Small business has responded to the recovery with new vigor. Last year alone, there were almost 600,000 new business incorporations, virtually all of them small business. That's an all-time high, and half again as many incorporations that there were each year during the early 1970's. At the same time, bankruptcies declined some 30 percent in the second half of '83, compared with the same period in 1982. And small business income, as measured by proprietorships and partnerships, grew by a remarkable 18 percent.

But we must go forward toward new goals so we can keep the nightmare of inflation from ever coming back. We must enact constitutional reforms like the line-item veto -- and, oh, do I want that -- [laughter] -- and the balanced budget amendment. And to make taxes more simple and fair and to provide greater incentives for growth in our people, I believe that we must press for tax simplification, a sweeping comprehensive reform of the entire tax code -- and not the kind of simplification that was sent to me the other day. Someone sent me a new tax form. It had two lines. Fill in -- ``What did you make last year?'' The second line said, ``Send it.'' [Laughter]

And, as you may have heard, I've just reached agreement with the Republican leadership in the Congress on a deficit reduction package totaling some $150 billion over the next 3 years. Just Thursday night, shortly after we reached agreement, the Senate Finance Committee concluded its work on a major portion of our package. I'm hopeful the entire package will be passed promptly by the Republican Senate. This $150 billion downpayment deserves bipartisan support because it will reduce the deficit in a way that's effective, responsible, and fair, by targeting $43 billion of savings in nondefense spending, $57 billion in defense authority reductions, and by raising some $48 billion in revenues primarily from closing certain tax loopholes of questionable fairness.

Now, make no mistake: The defense cuts will slow down our defense buildup somewhat, but not to a point of unacceptable risk. There will be no increase in tax rates on American families, and no tax increases that would threaten the economic recovery.

Permit me to mention a few of the inspiring small business success stories that I've heard, now, at this point. Back in 1978, Ginnie Johansen of Dallas -- she was in college and needed a belt to wear with casual slacks. And since she didn't like anything she saw in the stores, she made a few belts of her own. Several students offered to buy several belts, and soon Ginnie decided to try her hand at business. Today Ginnie's company grosses $8 million in annual sales, manufactures 57 different accessories and, best of all, employes 65 people, most of them young women. By the way, Ginnie is now 24 years old.

Roberto Ruiz of Tucson was born in Mexico, moved to the United States as a teenager. In 1977 he founded a construction company and an engineering corporation. Between 1979 and 1983, sales for Roberto's companies grew from $1.4 million to $7.2 million, an increase of more than 500 percent. Roberto's companies do a great deal of work in the Arizona border area, a section of the country hard hit by the devaluation of the peso. And Roberto has always made an effort to hire local workers. Last year alone he hired 100 employees, and today his firms account for more than 200 jobs.

And then there are Frank Huggins and Dean Robinson of Champaign, Illinois. Less than 2 years ago, they founded DISK-TEC -- a firm that makes components for computer disc drives. From March 1983 to February 1984, DISK-TEC recorded $3 million in sales, and the company projects sales of $15 million for the calendar year 1984. And today DISK-TEC employs about 230 people -- that's 230 jobs created by two talented entrepreneurs in less than 2 years.

Cervantes once said, ``Many littles make a much.'' And as small businesses spring up across the country, they add up to products we've never dreamed of, new standards of excellence, and jobs for millions. It's small business people like you who remind us of the enterprise that made our nation great. You show us that Americans have just as much pluck as ever, and you prove that our country's best days are still to come.

On behalf of all Americans, I commend you, and I thank you. God bless you.

And now, I'm going to sign the report. Speaking of small business, now there's an idea: Produce pens that would only write one word for bill signing ceremonies. [Laughter]

[At this point, the President signed copies of the report for transmittal to the Senate and House of Representatives.]

There we are. And there it is.

Note: The President spoke at 11:05 a.m. in Room 450 of the Old Executive Office Building, where he was presented with the report prepared by the Small Business Administration, with the assistance of the Council of Economic Advisers, for transmittal to the Congress. The ceremony was attended by representatives of the small business community.