The letter was found some years ago in the Library of Congress by poster southernsunshine.
I recognize this Schurz quote from a very long time ago. I will have to research a source and get back to you.
In addition to what Schurz proposed, Lincoln delayed the date for Congress to reconvene until after Lincoln had invaded the South and had the war underway. The Northern populace and the US Congress reacted just like Schurz had forecast.
It is a shame that some of the Northern posters on these threads can't (or won't) see what Lincoln did.