psql does not pick up hostname without -h even though they ae the same

When running psql locally using the tcp connect with tcpip_socket = true and
hostname_lookup = true in postgresql.conf, psql does not find localhost unless
the -h option is specified.

427 bash$ psql
psql: FATAL: No pg_hba.conf entry for host localhost, user jrg4598, database
jrg4598

428 bash$ psql -h localhost
Password:
Welcome to psql 7.3.4, the PostgreSQL interactive terminal.

Type: \copyright for distribution terms
\h for help with SQL commands
\? for help on internal slash commands
\g or terminate with semicolon to execute query
\q to quit

jrg4598=# \q
429 bash$