Cream butter till light and fluffy.
Beat in the sugar and egg.
Add the vanilla and milk.
Sift the flour together with the baking powder, salt, and nutmeg.
Stir into the beaten mixture.
Chill dough thoroughly.
Roll out 3/8" on a lightly floured board.
Cut out with a floured cookie cutter. (Or: form dough into a roll 2" in diameter, refrigerate overnight, and cut into thin slices.)
Bake at 375 degrees for 10 minutes or until delicately browned.