Preheat oven to 350°.
Cream the butter and sugar together in the bowl of a stand mixer for 3 minutes.
Scrape down sides and add in the vanilla and egg. Mix well.
Add in the baking powder and 2 1/2 cups of flour and then slowly add the remaining 1/2 cup stopping once the dough becomes 'playdoh' consistency.
Divide the dough into 8 equal sections. This is easily done by first splitting the dough in half. Continue splitting each section into half until you have 8 sections.
Using food coloring, color 6 of the sections. The other two will be left plain. Return one section at a time to the stand mixer and mix in the food coloring. You will want to end up with a ball of dough for each of the following colors: red, orange, yellow, green, blue, purple.
To assemble the dough, first make a 12 inch long snake with one of the plain dough sections.
Next, roll the purple dough out on a floured surface into a rectangle that is as long as the snake. Put the snake down in the middle of the purple rectangle. Brush a little water onto the purple rectangle, as well as onto the snake. Then tightly roll the purple rectangle onto the snake.
Repeat with the remaining colors in this order: blue, green, yellow, orange, red. The final layer will be the last plain section. Sometimes the dough won't make it all the way around the snake, that is okay because the clouds will cover the bottom half of the cookie anyway. Just make sure that all of the rough ends are on the same side.
Using a sharp knife, slice the dough into 1/4 inch sections. Lay them on a parchment paper lined cookie sheet. These won't spread or flatten much. I usually load up the cookie sheet pretty tightly.
Bake at 350° for 8 minutes. You'll want to pull them when they are puffy and no longer look glossy. If the cookies start turning brown at all, they will be crunchy instead of soft.
While the cookies are cooling, make the butter cream by combining all butter cream ingredients using a stand mixer. Turn the mixer on and just let it go for about 5 minutes until the frosting is light and fluffy.
Use a piping bag and pipe fluffy clouds onto the bottom half of the cookie. Sprinkle with gold sprinkles!