"Explain to me how allowing more foreign workers to come to the US under H1B visas will increase offshoring?"
...
Ron Hira has addressed this years ago, but here's how I see it:
You've got an office in Outerstan, and set up a sales office in Cincinnati (or Buffalo, or Southfield, or Jacksonville), using $10M-$25M in "incentives" given to you by the suc, er, fine local and state government economic development/crony socialists, widely poclaiming that you expect to employ 1K people (from where you refuse to say). You send 100 people from Outerstan to Cincinnati, or recruit 100 or 500 Outerstani's from USA universities within 400 miles of Cincinnati (or, more likely a combination, with most being fresh college grad Outerstanis in the USA already, with a very light sprinkling of new-US-grad Easten Europeans, South Americans, Africans...).
They're on a combination of F with OPT and L-1 and H-1B visas, and, as others have claimed, many of them want, and expect, to be able to stay in the USA for an extended time and perhaps become citizens. Many of them have gotten a great deal of help with their class-work and simply living in the USA, transportation, bail... from generous Americans. (Yes, I've helped several, and friends and relatives have helped many more a lot more than I did or could. In the end some of them were quite deserving of it, while others were not.)
On this first gig they know nothing about the application areas of your customers, and only academic knowledge about programming, not what real commercial/production programming involves. But your bid was so low that you dare not invest in any training of substance for anyone. So, you have the soon-to-be-former US citizen employees of the client firm train your guest-workers (and if they don't co-operate in training the guest-workers, or try to sabotage it in any way, they don't get any severance pay and they don't get positive recommendations for use when trying to get a new job -- they have communication problems, aren't team players, are borderline insubordinate, are not people people, or simply say you're reluctant to recommend them... nothing anyone could prove or disprove that you're stabbing them in the back, but it still sounds bad enough to stab them in the back to the extent of hampering their careers).
You have your guest-workers get a little experience doing the rote work, then a little work that requires understanding and creative figuring out how to do it. And then start sending them back to Outerstan in shifts of a few at a time. These rotated guest-workers and green card holders teach your crews in Outerstan HQ (your off-shoring services center), and they keep up a communications conduit between your bases of operations.
You (typically) sponsor 0.5%-2% of your guest-workers for green cards and send the rest back to the old country, or scrambling for new jobs in the USA when their gig is up, or simply illegally over-staying their visas. You have an iron grip on the compensation and working conditions of the ones you're sponsoring for green cards through the several yars of the application process, because it would be more difficult and expensive for them to jump ship (though the law explicitly allows them to do so). You also use a tiny number of US citizens for PR and to work with some of the guest-workers to drum up business (clients and contracts/gigs) for your bodyshop/off-shoring operation (yes, I've had bodyshoppers from Outerstan ask me to help them drum up business).
After a while, you've build up a collection of frameworks and templates, and the bodies shopped and green card holders and then the guys back at Outerstan Base are about to die from boredom doing essentially the same work with only minor variations repatedly, for different clients. But your bids are less wildly off the mark, and the guest-workers and off-shore operations people can't be too terribly dissatisfied because, as low as the pay is, and as crowded as they are in that shared house or apartment, it's better than the opportunities they see as possible to them.
You begin to send the 35-year-olds out to pasture on one pretext or another. Yes, you did fine in that last project, yes I know you've got family obligations now and house payments and a retirement fund that's practically non-existent, but we don't have another contract that requires exactly your expertise, so back you go. We really wish we could keep you here but we cannot. And then you recruit another batch of cheap, young, pliant Outerstanis with flexible ethics from the universities, with the latest buzz-words, methodologies and versions from the American universities (where they were taught these latest-greatest, must-have "skills" by 50-70 year olds who figured them out last month or last week or picked up from a conference or journal article, in classes along the with the US citizen students only one-third to one-half of whom will have a real shot at employment in the field), and send the guest-workers off on the new set of gigs.
Churn churn churn. Cheap cheap cheap. Young young young. Pliant pliant pliant. Flexible ethics, flexible ethics, flexible ethics.