The companies that are able to get the best deal, get the 10 programmers, the other companies hire less than ideal programmers. The benefits of their skills accrue to the 10 superstar programmers who make a fortune (at the expense of the investors in the companies that didn't get them) and go on to self-fund their own companies. More people in USA are attracted to programming as a profession (instead of banking, medicine, etc) because they see how well they can do if they're good, increasing the future supply of great developers.
This is how it works now (except for H1B).
What PG suggests is that in this situation, the benefits should accrue to the investors in the other companies - which just serves to concentrate wealth.
He's concerned HE and HIS industry will lose their tech lead because some superstar programmers end up getting paid millions a year (like top bankers) and become independently wealthy without bringing PG et al along for the ride.
Re argument #2 who cares what country "leads the world"? I don't want to see individual programmers taken advantage of at the expense of VCs (or other groups) and told "but its for the greater good of the country"
Re argument #3 they don't have average higher costs -> see many articles on h1-b abuse http://www.businessweek.com/stories/2008-10-08/high-rate-of-...