You raise some excellent questions, and the simple answer is that the water isn’t where it’s needed. Yes, the planet is 70% water, and most of that is salt water. Desalinization is not as easy as you would think, and sea water is fairly corrosive.
Sewage treatment plants in cities DO recycle the water, hence the presence of so much chlorine in town water to kill the residual bacteria and so on. Some places just dump untreated water back into the rivers and lakes and that is counterproductive. Near here, there’s a town with an environmentally friendly sewage treatment which is very cool and I wish more places would adopt their system, but it’s not practical in a city with millions of people.
The water for cities comes out of rivers and lakes and reservoirs, which depend on rainfall to maintain their levels. I get my water from a drilled well, and again, the aquifer I tap into has to refresh itself somehow. I’m lucky in that I’m on a good one, but a lot of people around here have their wells go dry at least once or twice every summer. There’s no easy answer to get the water from where it is to where it’s most needed.