When a Druid is wild shaped into a Giant Squid does Power Attack add -1 to attack and +2 to damage on its Constrict attack? Or would it add -1 to attack and +3 damage since the original damage is 1.5 X the STR multiplier indicating its a primary attack.
+2, but you don't take any attack penalty since there's no attack. Instead, you take a penalty to your CMB on the grapple check, if you are making a grapple maneuver. If the check triggering this constrict roll was not a CMB-based nor attack roll based, then you just get the plus 2.
Power attack states:
You can choose to take a –1 penalty on all melee attack rolls and combat maneuver checks to gain a +2 bonus on all melee damage rolls.
And Constrict provides a melee damage roll that meets none of the special criteria.
Combat maneuvers are attack rolls, so you must roll for concealment and take any other penalties that would normally apply to an attack roll. (Core Rulebook, p 199)
You might think the answer would be +1, because that's the bonus on your tentacle attacks, but constrict, while it involves a melee damage roll, is not itself any kind of attack. You might think the answer would be +3, because the str bonus damage to constrict has a 1.5X modifier, but that's not right either, for the same reason. Your DM also might think the ability doesn't apply, separating constrict and other kinds of nonstandard melee damage from the more normal 'I hit it with my sword' kind. That's a rules-consistent interpretation, as far as I'm aware (viz. nothing I'm aware of explicitly states constrict, rake, swallow whole, etc are melee damage, and though I'm sure some of them are offhandedly said to be so, constrict in particular doesn't seem to be one of them), if a bit weird.
Short answer: –1 Attack, +2 Damage ratio for grapple damage via Constrict with tentacle attacks
Constrict damage benefits from Power Attack damage because it is melee combat damage performed in the course of a grapple combat maneuver, and in the absence of a contravening rule grapple damage benefits from Power Attack damage; however, you may only attempt a free grapple using Grab and Constrict via a tentacle attack, because the Grab ability is restricted to the tentacle attack in the Giant Squid monster block. Also, since the tentacle attack is designated as a secondary natural attack in the Natural Attacks chart, you may only apply the –1, +2 ratio rather than the better –1, +3 ratio for primary attacks when using a tentacle attack to trigger grapple damage using the Constrict special attack.
Giant Squid stat block for reference.
Melee bite +14 (2d6+7), 2 arms +14 (1d6+7), tentacles +12 (4d6+3/19-20 plus grab)
Universal Monster Rules for reference.
A creature with this special attack can crush an opponent, dealing bludgeoning damage, when it makes a successful grapple check (in addition to any other effects caused by a successful check, including additional damage).
If a creature with this special attack hits with the indicated attack (usually a claw or bite attack), it deals normal damage and attempts to start a grapple as a free action without provoking an attack of opportunity.
Hoof, Tentacle, Wing … Secondary
At best: +1 per increment.
At worst: Power Attack does not apply.
Power Attack: (emphasis mine)
You can choose to take a –1 penalty on all melee attack rolls and combat maneuver checks to gain a +2 bonus on all melee damage rolls. This bonus to damage is increased by half (+50%) if you are making an attack with a ... primary natural weapon that adds 1-1/2 times your Strength modifier on damage rolls. This bonus to damage is halved (–50%) if you are making an attack with [a] ... secondary natural weapon.
The primary natural attack that is being used for Constrict would be that which is performing the Grapple; i.e. Arms or Tentacles (and with the grab special, I would hazard this is most likely to be the tentacles).
Neither of those use 1-1/2 times your Strength modifier for their damage rolls, and as such I would say that you do not get the +3 trade-off. (And in fact, you only get +1 from Tentacle being a Secondary, as that's how PA works.
But I will confess to not being entirely certain on how Constrict interacts with this: I am tempted to say it doesn't even apply Power Attack bonuses, because it itself is neither a weapon nor natural attack.)