To be fair, this sewer problem is really, really screwed up.  For starters, everyone has been aware of it for a very long time.  When I was studying civil engineering (my undergrad degree) back in the late 70s, everyone on the faculty was aware of the problem and made us aware of the problem in the course of our studies.  They also used it as a case study of sorts on the importance of funding and political will toward getting projects done.  The long and the short of the sewer problem is that no one in a position of power to make the spending decisions is really interested in a sewer rehabilitation project.  You can't see it (and, if you can't see it, you can't use it in campaign ads), and it is definitively unsexy.

But then when someone tries to do something positive, as often as not it winds up going sideways.

About 15 years ago, the municipality for which I was then lawyering went out and got a grant (about $700k, IIRC, from the EPA IIRC) to send TV cameras down its sewers and find where they were broken, leaking (suffering infiltration of groundwater from outside the pipe into the sewer flow),and cloged by roots or debris.  Then, the town went out and fixed the problems found.  One of them was a spring pouring almost a million gallons a day of groundwater into the system.   Since the town (and taxpayers) were paying for sewer services (through a consolidated sewer authority) by the mega-gallon, fixing these problems stood to save us a bundle.  And, when it came out that we were putting less into the system, the authority changed the billing algorithm so as to not rock the boat with all the other users.  (file under:  No good deed goes unpunished) better than two years of litigation donnybrook ensued....  

As bad as the NYC problem is (and it's Bad), on the Jersey side of the Hudson it is in many ways, worse.  When I was living on that side of the river, the part of town in which I lived was about 5 or 10 feet above sea level, built on reclaimed salt marsh.  "Reclaimed", BTW, means "dumped a lot of landfill and demolition rubble into the swamp to make it buildable".  The thing was, no part of the town was more than about 40 feet above sea level, and that was only a small part. The rest of it was between 5 and 15 feet above.  The reslt of being so low to sea level was that the outflow from the sewer plant was at sea level and the level of water in the sewers rose and fell with the tides.  There was a "tide gate" on the outflow - it would rise with the tide to prevent tidewater from coming in.  This gate, in turn, prevented the sewers from draining out of the treatment plant and this, in turn, prevented the untreated sewage from flowing to the plant in the first place.   At high tide on a normal day, you could look into the sewer on my corner and see the water standing there about a foot below street level.  

Bad enough.  But, add in an exceptionally high tide (when the moon and sun aligned just so) or storm surge associated with a good nor'easter or, a fortiori, the combination of both and a sewer backup was guaranteed.  

The real problem occurred when it would rain.  A brief thunderstorm dumping maybe a half an inch would result in the sewers overflowing into the streets.  Guaranteed.  A big storm - watch out.  This was exacerbated because the sewers, like in NYC, were of the "unitary" design model.  That is to say, all the water - rainwater, untreated sewage, washing your car water, whatever, would go into one big sewer pipe.  Modern designs separate the flows into storm sewers, which accept only the stormwater from the street drains, and sanitary sewers, which take the sewage to the plant.  Stormwater does not have to be treated in the same way as sewage, if at all.  It is often directed straight to the body of water.  Sewage, on the other hand, has to be treated before it can be discharged.  The unitary systems were pretty prevalent until ... wait for it ... the WPA and similar New Deal programs came along and facilitated cities building the bifurcated storm/sanitary systems which had become and remain the best technology for dealing with these flows.  

I lost count of the number of times an overnight thunderstorm would leave around sewer inlets a high water mark of wood scraps, paper trash and all the other small floatables (don't ask) in the stream of sewage.  The tide would go out, the streets would drain, and the muck would get washed back into the sewer by the next iteration of street sweeping.  Walking the dog, she was totally enamored of this mess - it smelled so good to her. I had to short-leash her.  

Sometimes, if not at home when the rain hit, you'd either have to hole up in a bar or a restaurant and wait for it to drain or, if pressed, wade through the mess.  You got to know which street corners were worst and avoided them.  You learned where the high spots were in various blocks and, in anticipation of bad weather, tried to park your car on them so it wouldn't be flooded out.  But there were a couple storms I remember where waders were the only solution.

The problem with replacing the old unitary systems is cost.  These unitary systems are most prevalent in the old cities of the Northeast that had been the first, in the Victorian era, to go from mud streets, open gutters and outhouses to paved streets and sewers.  The image of Art Carney's Ed Norton walking and working in the sewer is not inaccurate - the brick unitary sewers are easily big enough to walk through. That they overflow in storms tells you how much water they are being called on to carry.  But replacing all the sewers in New York would easily cost tens of billions of dollars, requiring as a mere predicate ripping up and then later repaving all the streets.  That's without considering how the project would become a fountain of graft and patronage rivalling and then far exceeding the reconstruction of the WTC.  By way of example "how" the graft would get done:  manholes cost more than straight runs of pipe.  I know of one block in the town where I used to live with over a dozen sewer manholes in the space of a single city block where two or three would suffice.   At least in the days those sewers were built the public got something tangible for their graft even if the tangible thing wasn't necessary.  And parts of the system are ancient - every now and again someone winds up digging up a colonial-era hollowed tree trunk, formerly a water pipe.  

The problem, then, is pretty much intractable unless and until some political leaders grasp the nettle of spending a lot of money over an extended period of time on a project which will take years - more likely decades - benefit the public at large (and not just a few big donors to the exclusion of others), is decidedly unsexy, will be forever unseen and, if it works, will prevent disease from running rampant.  As argued about the TARP bailouts, the problem avoided is one which no one can really appreciate, because no one got hurt.  As I see it, the only way this project gets running is if there is a massive outbreak of some sewage-borne disease which kills a lot of people.  But, in today's climate, the Administration in office when that avoidable catastrophe happens will trot out their version of Christie Todd Whitman to go on the record and tell everyone that the water is safe and there was no outbreak of disease, then bury the reports which foretold the catastrophe, as the Corps of Engineers tried to do relative to Katrina, blame the people who died for having the exquisitely bad manners to get sick and have Barbara Bush remind us how well it was working out for all those people getting free (or low cost) treatment for the illnesses their government's failures gave them.