>> No one talented will then go work for a government-run LLM building org.

I think you massively underestimate how many people would have no problem working for their government on this. Just look at the recent research into the Persona system for ID verification, where submitting your ID places you on a permanent government watchlist to check if you're not a terrorist. There's a whole list of engineers and PhDs and researchers present who have built this system.

>> “top talent won’t accept meager government wages” angle

Again, that's wishful thinking - plenty of people want to work in cybersecurity in AI research for the government agencies, even if the pay isn't anywhere close to the private sector. This isn't exclusive to the US either - in the UK MI5 pays peanuts compared to the private companies for IT specialists, yet they have plenty of people who want to work for them, either because of patriotism for their country and willingness to "help".