Repairing Postgresql after upgrading to OSX 10.7 Lion

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I recently upgraded to OSX 10.7, at which point my rails installation completely borked when trying to connect to the psql server. When I do it from the command line using 

psql -U postgres

it works totally fine, but when I try to run the rails server or console with the same username and password, I get this error 

...activerecord-3.0.9/lib/active_record/connection_adapters/postgresql_adapter.rb:950:in `initialize': could not connect to server: Permission denied (PGError) 
Is the server running locally and accepting
    connections on Unix domain socket "/var/pgsql_socket/.s.PGSQL.5432"?

Any ideas what might be going on would be super helpful! Thanks!

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