Preheat oven to 425°F (220°C).

In a large bowl, mix softened butter and cream cheese with a pastry blender or by hand until evenly blended.

Gradually blend in the sifted flour until the dough is uniform in color.

Divide the dough into 2 balls.

Wrap each ball in plastic wrap and refrigerate for at least one hour, or until firm enough to roll.

On a lightly floured surface, roll out one ball of dough to about pie crust thickness.

Using a 1-inch round cookie cutter, cut out circles.

Reroll remaining dough and cut out more circles until the first ball is used up.

Place the circles 1/4 inch apart on a foil-covered cookie sheet.

Place about 1/4 teaspoon of jam or preserves in the center of each circle.

Roll out the second ball of dough as in step 6.

Using a floured thimble, cut out a tiny circle in the center of each circle to create tops.

Reroll the discarded centers and cut into circles, making half bottoms and half tops.

Do the same as in step 7 with these new bottoms.

Place a cut-out top on each cookie with the jam, ensuring the jam shows through the center.

Press down the edges of each cookie to seal.

Bake in the center of the oven for 10-12 minutes, until the tops are very slightly browned.

Cool cookies completely.

Dust lightly with powdered sugar and serve.