SEO does "level off" at some point, occasionally, but it is never ineffective. I have worked with companies to bring them up to number one on key terms. In one example, a company I worked with became number 1 on all main product categories after I had worked with them for over a year. So I started noticing their traffic leveling off slightly, remaining almost the same, though still showing a slight increase that I would usually attribute to being an insignificant increase (a few percent). It was at that point, I spent my time keeping them in place, and learned very quickly that it wasn't the time to become complacent. Just reducing my efforts for 2 weeks, saw a decrease to third place for several keywords.
Complacency is never an option with SEO, and while promoting the concept of a permanent budget for SEO may seem like an attempt at simply trying to keep the Online Marketing industry alive, it is in fact a legitimate point, because there will always be someone ready to unseat you, whether you are a 5th place, or 1st place.