You need a MINIMUM of 2.5" to run 35's on a JK without SOME rubbing, suspension wise. To flex it fully, minimum of 3.5" if you disconnect your sway bar(s).
As for "balls," you would DEFINITELY want to re-gear. You wouldn't just "lose power"- your overall final drive ratio would drop going from smaller tires, as tires are gears in that equation. Your RPM's at any speed would drop. So, you re-gear to 4.56, 4.88, or 5.13 to compensate, if not add some RPM to improve acceleration. You'd also need a tuner to adjust the speedo for tire size/gear changes, and many of those can add some power.
My JK has plenty of chutzpah with 4.88's and 35's. It's no monster, but I can holeshot it pretty well for a man-size rig