This is an "n"ever ending debate, and to be true here are a few things that i have observed.
The demand for H1 is because everyone in the world considers US as a great place to work and that drives people in masses over here. Most of the input is good but there are really bad ones too who fake with wrong resumes etc and that is what is hurting the market and economy as such.
1. From my side I would consider that even for consulting etc there should be strong background checks.
2. Large indian companies do really have the requirement, I was in Infosys for a long time, and i am sure companies listed (Infosys et al) dont ever cheat, since they represent india, and moreover the investigation is not probing misuse as its being stated, but it seems the senate wants to know how its being used so that they can make it more effective.
3. Since H1B is scarce and it is not something that anyone can get in 1-2 days, large companies use contingencies to plan their future business and requirements and hence atleast 20% (i guess) of their requests are for future demands which might or might no materialize , but thats very valid considering manpower shortage leading to lost projects for Indian firms.
Taking the original author's points .
1. H-1B people are not employed for low wages, though yes there are some consultants who cheat unsuspecting employees.
2. Already there are lot of jobs that are not given to H-1B employees, especially the ones that require security clearance.
3. Lot of employers (good companies) are scared of approaching H-1B employees since they are scared of the over burden of sponsorship.
4. H-1B emp contribute to social security which they never get back for their own security.
5. I am against companies displacing locals with H-1B for low cost reasons, but either way high cost of locals is also harmful for the company since that would lead to closure of the company in total. Either way its a loss.
6. I have seen a lot of my friends who have H-1B working in bad jobs (i dont want to be a guru of classifying what good and bad is ) , but bad jobs are jobs that are boring and repetitive, without any scope of growth, but they have no other option.
7. Lot of companies treat H-1B contractors as dirt, with no respect for their inputs, but of course even if they are good they cant hire due to unwarranted fear.
So where does this lead to, we know there are people against H1 and there are people for H1, and the subset of people is also very well known, with people who are gaining by H1 are the ones who are on H1, they will support H1 and the ones who are citizens are against H1, with citizens who have been "job" displaced are the ones who have strong views against H1.
Is there anyone with a neutral opinion ? I guess that would be the toughest one to find.... The answer as usual is within us, and the state of a human mind is directly related to their status (h1 or citizen), in which case as usual bias, skews opinions .... :-)