If I’m hearing you right, you see that something is wrong but there’s too much of an incentive to use it that way. Further, they’re not getting what they want out of citizens (whatever that might be) and turn to foreign help.
With that aside, what exactly are new graduates lacking that isn’t in these equivalently experience-lacking guest workers? Both start from a general lack of organization-specific experience. Both end up leaving after 2-3 years. Yet the foreign help ends up receiving training that is apparently “too costly” for a citizen to receive.
What’s wrong is the system does not function to produce American workers who can do the job at a reasonable cost to the employer. The system is broken and small fixes around the edges won’t impact it enough to make the system work. H1-B is a symptom.
American universities don’t put out graduates with the skills needed. Between the ridiculous curriculum requirements, liberal professors who teach students to be victims, and in many cases the lax educational standards, many college grads are not ready to be a productive employee. The foreign born workers I’ve worked with tend to have much more hands-on work experience/training and are thankful to be in the USA. There are certainly downsides like language and culture barriers.
Government rules get in the way continuously whether it’s the huge costs of Barrycare, EEOC, ADA, OSHA, FMLA or whatever the hidden costs disincentivize hiring American workers even more.
“Solving” the H1-B isn’t a solution; it’ll just shift the problem elsewhere, likely causing more companies to outsource to India, etc. This brings its own set of problems. Concentrating on H1-Bs is playing a game of whack-a-mole. It may feel good to snack the vermin, but it ends quickly when the next one pops its head up.