How is the payroll tax cut extension being funded?

Increased taxes on millionaires.

The payroll tax cut is paid for by an increase in the guarantee fee on new loans backed by Fannie Mae and Freddie Mac, the government run mortgage companies.

Literally any other tax revenue the federal government collects. If you don't think there's enough revenue, then raise taxes. But you'd better raise it on the wealthy and not the working poor and middle class.

The general fund, like they always have.

China, probably.

When we run out of countries to borrow from, we will start up NASA again, to find aliens we can borrow from.