Cook pasta al dente according to package directions. Strain in a colander and set aside.
In the same pot, melt butter. Add flour and stir so that it makes a paste with the melted butter. Allow the flour to cook for about 5 minutes, stirring often.
Add 1 1/2 cups of milk while stirring constantly. Stir until the sauce is smooth.
Add the cream cheese and cheddar cheese and stir often until the cheese is melted.
Season with the garlic powder, nutmeg, onion powder, paprika, pepper and chili powder, if using.
Rinse the pasta with water so that the noodles don’t stick together. Add the pasta to the cheese sauce and stir well, but gently so that the noodles don’t break. Taste and add additional seasoning as desired. If the sauce is too thick, thin with milk 1/4 cup at a time.