The problem is that the more seats that are opened up for out-of-state students, the more in-state students will be squeezed out of the state’s flagship university. That detracts from the mission of a state university to serve Wisconsin’s kids.
So this question is not really about the cap on out-of-state students. It’s about the mission of UW Madison. If we want UW Madison’s focus to be on being the research and economic engine that it has become, then lifting the cap makes sense. If we want UW Madison to be a top-notch educational choice for as many Wisconsin citizens as possible, the lifting the cap would erode that mission.