Why was the National Recovery Administration of the New Deal declared unconstitutional?

The National Recovery Administration (NRA) was designed to oversee Roosevelt's "codes of fair competition," a price- and wage-setting program intended to ensure deflation didn't cause collapse of the national economy. The NRA was established under Section 3 of the National Industrial Recovery Act of 1933, as an extension of the Interstate Commerce Clause. Much of the industry it regulated conducted business entirely intrastate, however, which the Supreme Court held was constitutionally under the States' purview.

The Court decided that the NRA and its regulations were unconstitutional in A. L. A. Schechter Poultry Corp. v. US, (1935), a decision that closed the agency.

Explanation

Schechter Poultry Corp. v. US, 295 US 495 (1935)

In Schechter, the US Supreme Court found certain government-imposed regulations of the poultry industry, such as price- and wage-fixing, unconstitutional. The "codes of fair competition" would have allowed the President to dictate pricing and and other competitive aspects of the agribusiness under Section 3 of the National Industrial Recovery Act of 1933, as an extension of the Interstate Commerce Clause.

These laws would apply to certain food producers regardless of size and regardless of whether their business was entirely intrastate, as was the case with A. L. A. Schechter Poultry Corp. The Court's decision limited the government's power to act under the Interstate Commerce Clause, which it held was improperly applied to intrastate commerce. The Supreme Court ruled that the farm regulation was a state's rights issue, and invalidated a portion of the National Industrial Recovery Act of 1933, closing the National Recovery Administration (NRA).

Many of the NRA policies, such as setting minimum wage and restricting work hours, were successfully reenacted under the National Labor Relations Act (aka Wagner Act) passed in July 1935.