People shouldn't break that law, but we'll make it stricter in the hope people only break it slightly.

There is a very common belief that if you set the speed limit very low people who drive genuinely fast only tend to drive 5 or 10mph over the posted limit. 
I'm going to go out on a limb and say that isn't true, but it's something I used to assume would be the case, anyway I'm not here to debate that. 

I've seen speed limits set by the 85th percentile rule and those roads have had very high levels of compliance and *actual* speeds are not very much higher if at all. 
I would argue with them if they want speed limits that are rigorously obeyed this would be the method that they should argue for as it demonstrably works. 

The thing I have noticed, is that people who are behind campaigns to lower speed limits have admitted that they're setting speed limits based on this belief while simultaneously being unwavering that people should rigorously obey the speed limit, no matter how far removed it is from the engineering standard of the road, they will be adamant that people should obey the speed law because it's the law, which I'm aware is circular reasoning. At the same time doing the very thing that leads to extreme levels of non-compliance with that law you just set,

But if that was the case why would you condone setting it lower knowing there would be very high non-compliance as a consequence, but people would only be going X amount above it? If you think a lot of people will only dare break the law slightly then you will have a lot of people not obeying the law you argued for, knowing that will happen while arguing that they shouldn't. I hope that makes sense.

Is that  just cognitive dissonance.

I don't think this has anything to do with logical fallacies. This sounds like a legal/policy issue that can be backed up (or refuted) by statistical data.

But if that was the case why would you condone setting it lower knowing there would be very high non-compliance as a consequence, but people would only be going X amount above it? 

Because the goal isn't obedience to the law; the goal is public safety. If 55mph (or less) is the speed that will save the most lives and data shows that setting the speed limit to 45mph will result in the highest percentage of people driving 55mph or less, then 45mph is the ideal posted speed limit.

An example is similar when the deadline for using a product is set shorter than the product is correct (under the pretext that people will always use the item after the expiration date, so it is less harmful), while insisting that the deadline is strictly respected.
The issue is primarily about legal ethics and psychological laws.

This is why it is generally safe to eat things a few days past their use-by date.  The date is set downwards of the actual point the food is unsafe to eat because they assume people are going to break the rules.

I'm trying hard to find an argument here.  As I understand it, it might go something like the following:

P1: setting the speed limit low results in speeders speeding only a little. ( Aside from the claim that it's a common belief and something that the author assumes to be true, there's no support given for this premise ... meaning that it won't go far to lead people to any eventual conclusion -- at least probably not for folks like me who have never heard the claim before ... but perhaps that's just my sheltered existence!)

P2: Some speed limits are set by the 85%ile rule and many of those limits are obeyed in general

C?1: (I'm not sure if the "argue with them ... that they should argue" means that the author concludes that the 85%ile rule works or if the conclusion is that the rule does not work.)

P3: A claimed (and unsupported) observation that those wishing to lower speed limits believe that the limits should be obeyed, regardless of other factors.  ( Without evidence about this observation, it's difficult to assess whether the claim should be accepted or rejected.  Even if the claim is accepted, it speaks to what some people believe ... and not to anything proven about speed limits.)

P4: Some people believe that certain laws should be obeyed simply because "that's the law".  (Probably a valid assumption ... I'd like to think that most folks believe rules in general and the law in particular are to be obeyed.)

P5: Believing that laws should be obeyed because they are the law is claimed to be circular reasoning.   (If one accepts that a rule or a law is something that defines correct procedure and/or proper behaviour, it seems to me to be more an ethical or moral statement that circular reasoning.)

P6: The incomplete sentence about leading to non-compliance provides an incomplete idea -- it's not clear what "the very thing" is that leads to non-compliance.. Perhaps if the rest of the sentence were given ... .

Q1: There's probably some implication in asking the question at the start of the penultimate paragraph -- I just don't understand what it might be, other than perhaps the implication that setting lower-than-needed limits results in non-compliance.

P7: (or maybe C2?): Thinking many people will exceed speed limits by only small amounts means that some people will disobey the law.

I'm not sure where it all started and I'm less sure where it has ended.  I'm sorry, but I wish it made sense!