What to do about a negative co-worker who is also my friend?

You sound like a levelheaded person, who perceives your job situation in a much more realistic way than your friend. You should not make his problem your problem. Would you really want to be supervised by a person with such a negative outlook? There are a couple of things you could try. One is not listening to his comments at work. If he can switch his negativity on at work and off when hanging out, his negativity may be just a strategy to get what he wants. By listening you are tactilely agreeing with his views. Perhaps you can change the subject when he starts his negatively act. You may limit your exposure by hanging out with other coworkers more often. If your friend is smart he will figure out that you are tried of his negativity. If you want to be more ertive, tell him that you are tired of listening to him complain, and you feel listening to him bad mouth everyone at work may be hurting your chances of being promoted. His reaction may surprise you.