The payroll tax cut and extended unemployment benefits expire on February 29. And though the House-Senate conference committee charged with figuring out a year-long extension met yesterday, there really isn’t a lot of movement toward a solution. Pay-fors seem to be the biggest stumbling block.

On Wednesday, the House approved one of the GOP’s favored offsets, an extension of a pay freeze on federal employees.

Democrats have not embraced that proposal, and conferees from the party said Wednesday that they were still hopeful that a surtax on millionaires could be used to fund an extension of payroll tax relief.

“We’re not going to renegotiate what was done in the debt-ceiling increase,” said Sen. Ben Cardin of Maryland, a Democratic conferee, about the federal pay freeze. “That’s off the table.”

There’s another meeting scheduled for today. I have an idea for the conference committee: don’t pay for the changes. Just don’t. It’s a minimal amount of money – maybe $150 billion – in the grand scheme of things. And paying for it would only reduce the impact. If you really want to pay for it, use the budgetary gimmick of the savings from overseas contingency operations – the drawdown of war funding from Iraq and Afghanistan. Those are scorable savings, and capping those funds makes it harder for the Pentagon to use them as a slush fund to finance some of their preferred programs for which Congress refused to provide funding. Democrats are actually talking about not offsetting the unemployment extension, on the grounds that those are emergency benefits. But it’s early yet.

Co-chairs of the conference committee Dave Camp and Max Baucus floated the idea of a short-term extension while the details get hammered out. So we might get this year-long extension in increments.

The other issue that needs to be worked out is the proposed cut in unemployment benefits, which seems at least partially inevitable. Republicans want to not only cut the benefit from 99 to 59 weeks, but want to force unemployed workers without a high school diploma to seek a GED as a condition of receiving benefits, and to allow states to drug-test applicants. The two-month extension did not extend the “look-back” for states to keep receiving the final 20-week tier of extended benefits, which effectively curtails them from 99 to 79 weeks. Democrats are talking about “second-tier” changes to unemployment insurance, though they did not define what that means.

The extension is likely to happen, but we’re probably going to go through a lot of heartburn before it’s done. And the offsets are really unclear at this point.