I'll provide an alternative narrative:
Additional seats at a significant premium are created for international students to allow subsidizing tuition for domestic students and offering of additional services on campus, research positions etc
If you get rid of international students then domestic student tuition will increase and/or campus services offered will decline.
Universities do not want to decrease their endowment. They want to find ways to grow it. And another goal is to increase the international reputation of their institutions. Here international students act like a kind of missionary.
This narrative describes public companies focused on growth and brand instead of schools focused on offering the best education possible in their country.
They have lost their way. They have been corrupted by bribes heaped upon them by rich international people buying their children advantage.
The good news is if you go down the list of "best" universities until you get to one with >30% acceptance rate, you still get a world class education that will more than prepare you for just about anything other than the bare few handful of jobs moronic enough to overvalue an "elite" education.
> There are a limited number of seats at the best universities.
This is only true for a few elite universities.
In particular, for public universities, the vast majority, including many/most of the top ones, do not have any cap on the amount of incoming students. Whoever meets the bar gets in.
Source: Local state university in an interview. This came up during the issue of affirmative action. They pointed out (with actual statistics) on how most of them have open admission. The context was that admitting someone via affirmative action was not depriving anyone of a seat.
This was for "regular" undergrad admission. Grad school/business/law/medicine (perhaps pre-med) may be different.
These top universities already have enough money to operate for a century as non-profits.
They're selling 15-20% of the seats to international rich people.
The appropriate number is probably more like 1.5% - 2.0%, with the rest going to American citizens.