Preheat oven to 400°F.
Lightly grease baking sheet.
Sift flour, brown sugar, nutmeg and 1/8 teaspoon cinnamon into large bowl.
Cut in butter using pastry blender or 2 knives until mixture resembles coarse meal.
Add egg and milk and mix well to form thick dough.
Roll dough into 1-inch balls.
Transfer to prepared baking sheet, spacing about 2 inches apart.
Cover bottom of drinking glass with moistened cheesecloth or towel.
Flatten cookies to thickness of 1/8 inch.
Combine sugar and remaining cinnamon and stir to blend.
Sprinkle sugar mixture over cookies.
Bake until lightly browned around edges, about 7 to 8 minutes.
Let cookies cool slightly on wire rack before serving.