By Patricia Zengerle

WASHINGTON U.S. congressional leaders on Wednesday put off debate on the National Defense Authorization Act, or NDAA, an annual bill setting policy for the Pentagon, as the must-pass legislation got caught up in debate over raising the country's borrowing limit.

House of Representatives Armed Services subcommittees had been scheduled to begin debate this week on the closely watched NDAA, which determines how the military spends its nearly-trillion-dollar annual budget. But it was put off at least temporarily as lawmakers and the White House hold talks on raising the government's $31.4 trillion debt.

House Republicans passed a bill last month, with no support from Democrats, that would raise the debt ceiling only in exchange for sweeping spending cuts, including sharp reductions in "discretionary" spending on social programs.

Democrats criticized the bill and said it would not be considered in the Senate, where their party controls a majority of seats.

At the same time, Republicans have been pushing for an increase in defense spending, which exceeded $850 billion in the NDAA that passed last year, drawing criticism from Democrats.

"You cannot increase the defense budget while refusing to take the steps necessary to actually raise the debt ceiling, and while proposing to make massive cuts to the discretionary budget," Adam Smith, the ranking Democrat on the House Armed Services committee, said in a statement.

Congress has passed the NDAA every year since 1961. Because it is one of the few major pieces of legislation that becomes law every year, the NDAA is closely watched because it determines everything from purchases of ships and aircraft to how to address geopolitical threats.

(Reporting by Patricia Zengerle; Editing by Stephen Coates)