Uncomfortable laughter at its finest
Here's the full video, and here's the transcript.

More uncomfortable than the audience is the fact that Colbert was invited to show that this administration can laugh at itself. I'm interpreting that to mean that they want to appear as if they knowingly take part in the comedy, which is disturbing on several levels.
Colbert is really funny and has every right to make jokes about governmental fuck-ups; however, the government itself does not have that right, since they're the ones fucking up. It's like if an English aristocrat in the 1700s wrote a pamphlet calling for the cannibalism of Irish children to whose starvation they were contributing. When Jonathan Swift does it, it's pointed satire. When the aristocrat does it, it's callow and trying to draw humor from their own terrible actions. You can't make a joke about something awful if you're the one doing it.
And not only that, they didn't even successfully pull it off. Good for Colbert for lampooning them so severely that they couldn't even fake a laugh at the effects of their own screwy policies.