Cream butter; gradually add sugar, beating until light and fluffy. Add egg and water, beating well.
Combine flour, soda, and caraway seeds; add to creamed mixture, beating well. Chill dough 1 hour
Roll dough out onto a lightly floured surface to 1/2-inch thickness; cut out with a 2-inch cookie cutter. Place on lightly greased cookie sheets. Bake at 400° for 8 to 10 minutes or until lightly browned. Store in airtight containers.