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The grammar is fine. When using a linking verb, the subject and the predicate nominative are equivilent. In this case, the predicate nominative, "policy", is singular. The subject is ambiguous as to whether "ignorance" and "arrogance" are intended to be construed as a unit or as seperate types of policy. When used with a singular verb, this sentence means that ignorance and arrogance when combined makes for bad policy. It would also be correct with "are" but would take on a different meaning. "Ignorance and arrogance are bad policy" would mean that each, taken seperately, was bad policy. I think the message here is clearly that the two are being used in conjuction.
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