So what? Malicious extensions can do anything. Don’t run untrusted code on any computer you care about, ever. This is true for any IDE extension, any NPM package, any mod pack, etc.
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Glad this was found due to the open source nature of vscode, who knows how long something like this could have festered if someone malicious found it via decompiling and reverse engineering.
Open source is great at finding vonurabilities fast and fixing them, but I can understand the idea behind closed source code taking longer to find but longer to become public, and be fixed
TBH, you don't need to read any source to figure this out. If a third party binary can execute other processes under your user, they can do anything that you can which doesn't require admin privileges. Given how many extensions launch other programs, it's pretty much a given this is the case.
I wonder what would this would mean if people was using ssh connections through vscode